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IRS Unveils 2024-2025 Tax Season Adjustments with Emphasis on IRS New Tax Brackets

(Photo: forbes)

IRS Unveils 2024-2025 Tax Season Adjustments: New Tax Brackets, Deductions, and Implications for Taxpayers

The IRS has announced adjustments to income tax brackets and standard deductions for the 2024-2025 tax season, revealing a 5.4% increase in income thresholds for each new tax bracket as part of the IRS new tax brackets. (Photo: usatoday)

IRS Announces Overhauled Tax Brackets for 2024-2025: Understanding the Changes and Implications for Taxpayers

According to source, the IRS has recently revealed adjustments to income tax brackets and standard deductions for the upcoming 2024-2025 tax season, marking significant developments in IRS new tax brackets. These changes, highlighted in the annual inflation adjustments report, signify a 5.4% increase in income thresholds for each new tax bracket as part of the IRS new tax brackets. The primary objective of these adjustments is to counteract the effects of inflation and address the concern of “bracket creep” whereby taxpayers might be propelled into higher brackets without experiencing a real increase in income or purchasing power.

Although this year’s 5.4% increase is marginally lower than the historic 7% bump from the preceding year it remains noteworthy compared to periods characterized by lower inflation rates. As stipulated by the 2017 Tax Cuts and Jobs Act, the United States currently employs seven federal income tax rates in a progressive manner under the IRS new tax brackets. Ranging from 10% to 37%, these rates impose higher percentages on higher incomes.

For the 2024 tax year IRS new tax brackets dictate that the lowest rate of 10% will apply to individuals with taxable income up to $11,600 and joint filers up to $23,200. Meanwhile, the top rate of 37% will be applicable to individuals earning above $609,350 and married couples filing jointly with an income of $731,200 or more under the IRS new tax brackets.

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Expanded Deductions and Contribution Limits: Unpacking the Details of IRS’s Comprehensive Changes for 2024 Tax Year

Moreover, standard deductions for the 2024 tax year have undergone adjustments, emphasizing the significance of IRS new tax brackets. Married couples filing jointly will witness an increase to $29,200, a $1,500 increment from the previous year, while single taxpayers will experience a standard deduction of $14,600, a $750 rise from 2023. Heads of household will observe a $1,100 increase to $21,900, reflecting the impact of IRS new tax brackets.

In addition to these alterations, the IRS new tax brackets encompass adjustments for social security benefits, flexible spending account (FSA) contributions, and retirement savings for the 2024 tax year. Social security benefits are poised to increase by 3.2%, surpassing $50 a month from January.

The FSA contribution limit is set to rise to $3,200, up from $3,050, and the cap for employee contributions to 401(k), 403(b), and most 457 plans has been elevated to $23,000. Annual contributions to an IRA will also be capped at $7,000, up from $6,500 in 2023, showcasing the multifaceted implications of IRS new tax brackets on various aspects of taxpayers’ financial planning.

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