The new tax season is almost here, and that means it’s time to get familiar with the 2024 tax brackets! The Internal Revenue Service (IRS) just released important information about the upcoming tax year, including new ranges for tax rates, deductions, and credits that may affect how much tax you need to pay. Let’s break it down together!
What are the Tax Brackets for 2024?
The IRS has established seven tax brackets for 2024. These brackets determine how much tax you pay based on your income. For example:
- If you make up to $11,000 as a single filer, you will be in the 10% tax bracket.
- If you earn between $11,001 and $44,725, you’ll pay 12% on your income.
- As your income increases, you move into higher tax brackets. The highest bracket for 2024 is 37% for income above $578,125 for single filers.
New Standard Deductions
One good thing to look forward to is that the standard deduction has increased for 2024! Here’s what you’ll see:
- Single filers will receive a deduction of $14,600.
- Married couples filing jointly can deduct $29,200.
- Heads of household will enjoy a deduction of $21,900.
This means you can subtract these amounts from your total income before calculating your taxes, which can make a big difference!
Changes to the Earned Income Tax Credit
If you work and earn a low to moderate income, you might be eligible for the Earned Income Tax Credit (EITC). For 2024, the maximum EITC has been raised:
What About Health Savings Accounts?
If you have a Health Savings Account (HSA), you’ll be pleased to know that contribution limits are also changing. In 2024, you can save more money for health expenses:
- The contribution limit for individuals will be $4,150.
- For families, the limit is now set at $8,300.
Looking Ahead to 2025
It’s also a good idea to keep an eye on the tax changes coming in 2025. The IRS has already indicated that the 2025 tax brackets will also see increases:
- Standard deduction amounts will increase further.
- Tax rates are expected to adjust once again, so make sure to stay informed!
Understanding the Alternative Minimum Tax
Don’t forget about the Alternative Minimum Tax (AMT)! In 2024, the AMT exemption has risen, which means you’ll pay fewer taxes if your income is above certain amounts:
- The AMT exemption for single filers is $81,300.
- For married couples filing jointly, it’s $162,600.
Stay Prepared for Tax Season!
As tax season approaches, it’s essential to gather all necessary documents and understand how these changes could impact your tax return. If you have questions, consider reaching out to a tax professional who can help you navigate these updates. Being informed will help you make sure you keep as much of your hard-earned money as possible!
