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It’s safe to say that over the past few years, Americans with middle- and lower-class incomes have found life to be increasingly challenging. American families are being squeezed out of all of their hard-earned money by a combination of factors, including inflation, growing living expenses, high interest rates, increased rent, price increases by businesses across all industries, and more. Fortunately, the IRS has decided to lessen the suffering. They have two options for doing this: raising the standard deduction and raising all tax brackets.
Your experience with this increase will vary depending on a few factors. Without a doubt, those in lower tax brackets will be most affected by the change. Even though tax season is still a few months away, families who are having financial difficulties should be relieved to hear this. However, your returns for this year will differ in some way, regardless of the tax bracket you are in. That change will probably be a reduction in taxes. What impact will the modified brackets have on you, and how much have they changed?
Details on the changes
Your experience with this increase will vary depending on a few factors. Without a doubt, those in lower tax brackets will be most affected by the change. Even though tax season is still a few months away, families who are having financial difficulties should be relieved to hear this. However, your returns for this year will differ in some way, regardless of the tax bracket you are in. That change will probably be a reduction in taxes. What impact will the modified brackets have on you, and how much have they changed?
This month, on November 10, the IRS released the news. Everybody’s returns will change as a result of the increase in the bracket at every level. The 2017 Tax Cuts and Jobs Act’s bracket boundaries were also expanded.
We have progressive tax rates. The taxable rates for each bracket have not changed, despite an increase in the amount needed to qualify for each level. Your total income is subtracted from any deductions to arrive at these tax rates. The following tax rates remain the same: 12%, 22%, 24%, 32%, 35%, and 37%.
What does the term “progressive brackets” mean? Assume, for illustration purposes, that your taxable income is $50,000 after all deductions. You would then be in the third 22% tax bracket. That would be a flat tax rate, though, since not all of your income is taxed at that rate. Your first $11,601 is taxed at the lowest bracket of 10% in a progressive tax system. The subsequent tax bracket would impose a 12% tax on the remaining $35,550. The remaining amount would be subject to 22% tax in the third bracket.
Tax brackets vary based on your individual circumstances. Your tax situation is going to vary depending on whether you are married, single, a caregiver, or something else. The most typical filing scenarios are listed below. Remember that only the Federal Income Tax brackets are determined by the IRS. The governments of your state and municipality determine your state and local taxes. The IRS rates won’t have an impact on them.
This will be your bracket if you and your spouse wish to file jointly just once each tax year, regardless of whether you are married and have children or not. You combine your income, expenses, and deductions.
| Tax Rate | Married Filing Jointly Taxable Income Range |
|---|---|
| 10% | $0 to $23,200 |
| 12% | $23,201 to $94,300 |
| 22% | $94,301 to $201,050 |
| 24% | $201,051 to $383,900 |
| 32% | $383,901 to $487,450 |
| 35% | $487,451 to $731,200 |
| 37% | $731,201 or more |
You will file as an individual if you are single and do not have a spouse.
| Tax Rate | Individual Taxable Income Range |
|---|---|
| 10% | $0 to $11,600 |
| 12% | $11,601 to $47,150 |
| 22% | $47,151 to $100,525 |
| 24% | $100,526 to $191,950 |
| 32% | $191,951 to $243,725 |
| 35% | $243,726 to $609,350 |
| 37% | $609,351 or more |
Up until you hit the higher brackets, your taxable range resembles that of an individual if you’re married but wish to file separate returns this year. Because a married couple’s expenses are likely to be lower when compared to two individuals’, the income range at this level is lower than that of an individual.
| Tax Rate | Married Filing Separately Taxable Income Range |
|---|---|
| 10% | $0 to $11,600 |
| 12% | $11,601 to $47,150 |
| 22% | $47,151 to $100,525 |
| 24% | $100,526 to $191,950 |
| 32% | $191,951 to $243,725 |
| 35% | $243,726 to $365,600 |
| 37% | $365,601 or more |
You must be single and provide support for another dependent in your home in order to file as the head of household. This could be a child or another relative who is unemployed or unable to file their own taxes. Their tax brackets are significantly higher to reflect the fact that they must provide for one or more other people who do not contribute to the household income.
| Tax Rate | Heads of Household Taxable Income Range |
|---|---|
| 10% | $0 to $16,550 |
| 12% | $16,551 to $63,100 |
| 22% | $63,101 to $100,500 |
| 24% | $100,501 to $191,950 |
| 32% | $191,951 to $243,700 |
| 35% | $243, 701 to $609,350 |
| 37% | $609,351 or more |
The IRS raised the standard deduction as well as the thresholds to move into the next tax bracket. Rather than itemizing all of their transactions for the year and deducting all relevant expenses, everyone can apply the standard deduction to their taxes. The idea behind this is that by estimating the number of deductible expenses that the average American has each year, it will save taxpayers both time and money. Additionally, by simplifying and condensing each return, it increases the volume of returns that the IRS can process.
Over the past few years, the standard deduction has risen on a regular basis; the biggest increase occurred in 2022. The pattern of significant increases is maintained in the 2024 tax year.
The standard deduction for married couples filing jointly in 2024 is going to be $29,200. Compared to the $27,700 standard deduction for 2023, this represents a $1,500 increase. The new standard deduction for individuals is $14,600. This represents an increase of $750 over the $13,850 deduction from 2023.
The standard deduction for heads of households is now $21,900. Compared to the prior deduction of $20,800, this is $1,100 more.
Conclusion
There is nothing you need to do during tax season to be eligible for the new rates or to apply the standard deduction unless you prepare your own taxes, which is an uncommon occurrence given the complexity of the American tax system. If you file your taxes using an online tax preparation tool or service, you don’t need to know which bracket you are in. However, you can use this information to estimate your potential tax liability for the upcoming year.
The rates in effect now are only transitory. The intricate structure of the American tax system is ever-changing, as is customary. When the current rates expire in 2026, they will no longer apply as they did in 2018.
After that, the rates for each bracket will rise to 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%, respectively. When or if these rate increases replace the current ones, Americans with lower incomes will suffer. This is due to the fact that impoverished Americans pay a higher proportion of their income than do wealthy Americans, with each percentage increasing for lower brackets. The rate increase can be revoked or replaced by legislation, but no concrete plans will be revealed until after the 2024 election.
We can anticipate that the tax brackets will rise again the following year if inflation and living expenses stay high. While it might not solve the issue, it does assist low-income families.
