2024 Tax Brackets: Why Your Tax Bill Could Go Down
2024 tax brackets adjusted for inflation, meaning many could see a lower tax bill next year. Here's what you need to know.
The numbers in the tables above are referring to your taxable income, which is different from your total income. Your taxable income is the amount of money that is left after applying any adjustments and deductions to which you are entitled. For example, if you are single and earn $100,000 in 2024, have a $7,000 deduction for retirement contributions, and use the $14,600 standard deduction, your taxable income would be $78,400.
These are marginal tax brackets. Consider the above example of a single individual with $78,400 of taxable income. Based on the tax brackets for single filers in the chart, their tax would be calculated accordingly.
In addition to the changes to the tax brackets, the standard deduction is increasing as well. For married couples, the 2024 standard deduction is rising to $29,200, a $1,500 increase compared with 2023. For singles and heads of household, the 2024 standard deduction will be $14,600 and $21,900, respectively.
Many other significant tax items are also adjusted annually for inflation, such as the maximum earned income tax credit (EITC) and the Alternative Minimum Tax exemption, both of which are rising significantly as well.
The IRS adjusts the 2024 tax brackets upward to compensate for inflation, which remained high for yet another year. This could mean a lower tax bill for many people.
If your income has roughly kept pace with inflation, there should be minimal change to your effective tax rate. But the reality is that many incomes didn't. If your income has not, you could see your federal income taxes go down in 2024 because of the higher income ranges that correspond to each marginal tax rate.
For example, if you are married and earn $100,000 in 2023, you claim the 2023 standard deduction for married couples filing jointly ($27,700), which brings your taxable income down to $72,300. Based on the 2023 tax brackets, you would owe $8,236 in federal tax for 2023.
Now, let's say that you earn $100,000 again in 2024. The higher 2024 standard deduction would reduce your taxable income to $70,800. And the generally more favorable tax brackets would mean that you owe $8,032, or over $200 less than in 2023.
It's important to note that these changes are all for the 2024 tax year -- that is, the tax return you'll file in 2025. If your income increases along with inflation and then some in 2024, that's great. But if not, you could see some tax relief.