An IRS Tax Brackets 2024 of income taxed at a specific rate. The U.S. uses a progressive tax system, which means that the more you earn, the higher the percentage of your income you will pay in taxes, but only on the income within each bracket.
The IRS has released the following tax brackets for the 2024 tax year. These brackets apply to ordinary income, such as wages, salaries, and business income.
Changes in 2024 Tax Brackets
- Inflation Adjustments: The IRS adjusts the tax brackets for inflation each year. In 2024, inflation caused an increase in the income thresholds, meaning that more people will likely fall into lower tax brackets or be able to keep more of their income at a lower rate.
- Higher Earnings Face Higher Rates: As expected, the highest earners will continue to face the 37% tax rate. However, the additional income thresholds at which people fall into each bracket have shifted upward.
- Changes for Married Couples: For married couples filing jointly, the tax brackets have also been adjusted. For example, the 12% rate applies to those earning up to $89,450 (compared to $89,250 in 2023).
- Heads of Household: Taxpayers who qualify as heads of household also benefit from inflation adjustments. For example, the 12% bracket for heads of household applies to those earning up to $59,450, which is an increase from the 2023 threshold.
How do Tax Brackets Work?
The 2024 IRS tax brackets offer some relief for taxpayers with the adjustments made for inflation. To better understand how tax brackets work, let’s take an example:
Scenario 1: Single Filer
Let’s say you’re a single filer with a taxable income of $50,000 in 2024. Here’s how your income will be taxed:
- The first $11,000 will be taxed at 10% = $1,100.
- The next $33,725 (from $11,001 to $44,725) will be taxed at 12% = $4,047.
- The remaining $5,275 (from $44,726 to $50,000) will be taxed at 22% = $1,160.50.
Total tax liability = $1,100 + $4,047 + $1,160.50 = $6,307.50.
Scenario 2: Married Filing Jointly
If you’re married and filing jointly with a taxable income of $100,000, the tax calculation works like this:
- The first $22,000 is taxed at 10% = $2,200.
- The next $67,450 (from $22,001 to $89,450) is taxed at 12% = $8,094.
- The remaining $10,550 (from $89,451 to $100,000) is taxed at 22% = $2,321.
Total tax liability = $2,200 + $8,094 + $2,321 = $12,615.
Manage Your Taxes in 2024
With the IRS tax brackets in place, here are some strategies to manage your taxes for the 2024 tax year:
- Maximize Retirement Contributions: Contributing to retirement accounts like a 401(k) or an IRA can reduce your taxable income, potentially lowering your tax bracket.
- Tax-Advantaged Accounts: Consider contributing to Health Savings Accounts (HSAs) or Flexible Spending Accounts (FSAs), providing tax benefits while helping you save for medical expenses.
- Consider Itemizing Deductions: Deductions exceed the standard deduction. Common deductions include mortgage interest, property taxes, and charitable contributions.
- Tax Planning for the Future: It may be beneficial to look into tax planning strategies now to minimize the impact of being pushed into higher tax brackets.