The IRS has announced its 2024 inflation adjustments on November 9, 2023. Although the U.S. income tax rates will remain the same during the next two tax years, due to a change in the tax brackets (the buckets of income that are taxed at progressively higher rates), you may be getting a higher refund. The federal income tax brackets for 2024 increased income thresholds for each bracket by approximately 5.4% to account for inflation. Most of the tax adjustments will apply to 2024 income tax returns, due on April 15, 2025.
The federal income tax brackets delineate the amount owed on each segment of one’s “taxable income,” calculated by deducting either the standard or itemized deductions from the adjusted gross income. In 2024, the standard deduction has also been adjusted for inflation, rising to $14,600 for single filers from $13,850 in 2023. For married couples filing jointly, the deduction stands at $29,200, up from $27,700, potentially reducing the taxable income for certain filers.
While this adjustment is less substantial compared to the changes seen in 2023, it still represents a notable uptick. For individuals whose income remains consistent with the previous year, the 2024 tax bracket modifications could translate into a modest increase in take-home pay, contingent upon their withholding, experts suggest.
Even with an increase in paycheck size in 2024, individuals should remain cautious as new tax adjustments could potentially alter their tax bracket. Monitoring paycheck withholdings for federal and state taxes will be vital, as they influence the amount of tax paid throughout the year. A surplus of withholdings could lead to a tax refund, whereas inadequate withholding may result in a tax bill.
Persistent inflationary pressures could erode potential tax savings. Despite a slight dip in annual inflation indicated in November, many Americans continue to grapple with the effects of heightened costs, particularly in sectors such as housing and motor vehicle insurance.
The best action plan is periodically reviewing your state and federal withholdings throughout the year to avoid a surprise tax bill. Utilizing your withholdings to your advantage can save you money as inflation and the cost of living increase through the year.
To help you figure out how much you can expect to pay, here are the tax brackets for both the 2023 and 2024 tax years. You will also find guidelines for calculating your income tax based on the top bracket that applies to you.
Estess CPAs is a professional accountant firm that brings years of experience and reporting standards along with a supporting team of experts. Therefore, your business will gain from improved efficiency, reduced business costs, accurate financial reporting, and tax planning. We proudly serve the Belle Chasse, Luling, and the Greater New Orleans Area. We treat your family like ours and can’t wait to help you improve your operations. Estess CPAs has become an industry-leading tax preparation and advisor firm, offering accounting and bookkeeping services. In addition to helping small businesses run efficiently and save on tax liability, the accounting firm provides a wide range of services, including tax services, accounting, bookkeeping, and payroll services. Free consultations are available by phone, video conference, or in person. To find additional information about Estess CPAs’ services and locations, call (504) 433-5122 (Belle Chasse office), (985) 785-1470 (Luling office), or visit estesscpa.com.
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