Americans are preparing to file their tax returns with the new year knocking at the door. The Internal Revenue Service (IRS) has released its yearly inflation adjustments, which will affect more than 60 tax provisions as inflation still impacts Americans' wallets.
The proposed changes are intended to lessen the financial burden on taxpayers while ensuring that tax rates stay up with growing expenses.
The IRS has announced the federal income tax brackets for 2024, which range from 10% to 37%, per USA Today.
The following are the tax rates: income up to $11,925 (single) or $23,850 (joint) is 10%; income up to $48,475 (single) or $96,950 (joint) is 12%; and income beyond $626,350 (single) or $751,600 (joint) is 37%.
With the IRS making the 2024 stats public, taxpayers are encouraged to closely monitor the standard deduction for single and married filers. Being aware of the changes would translate to more fruitful decisions for the taxpayers and improved financial planning.
The key adjustments in the tax adjustment release are as follows:
The standard deduction has been raised to $29,200 for married couples filing jointly, up $1,500 from tax year 2023, $14,600 for single taxpayers, up $750 from tax year 2023, and $21,900 for heads of households, among other significant changes.
In addition, the foreign earned income exclusion rises to $126,500, the annual exclusion for gifts rises to $18,000, the Earned Income Tax Credit maximum amount for taxpayers with three or more qualifying children increases to $7,830, and the Alternative Minimum Tax Exemption rises to $85,700.
High-income households are impacted by a change to the Alternative Minimum Tax (AMT) exemption that the IRS has announced. What you should know is as follows:
High-income earners are required to pay a minimum amount of tax under the AMT, a separate tax structure. It accomplishes this by restricting specific tax benefits that have the potential to drastically lower a taxpayer's ordinary tax liability.
The Alternative Minimum Tax (AMT) exemption amount for the 2024 tax year has increased, according to the IRS. The exemption level has been raised to $85,700 for single taxpayers, with a phase-out beginning at $609,350. In comparison to tax year 2023, this amounts to an increase of $4,400 and $31,200, respectively.
For the 2025 tax year, the Internal Revenue Service (IRS) has highlighted impending changes that may affect taxpayers. Beginning in January 2026, these modifications will be reflected in tax returns.
Here are the changes to the standard deduction for tax year 2025:
- Single taxpayers and married individuals filing separately: $15,000 (up $400)
- Married couples filing jointly: $30,000 (up to $800)
- Heads of households: $22,500 (up $600)
Alternative minimum tax exemption amounts for tax year 2025 for unmarried individuals increases to $88,100 ($68,650 for married individuals filing separately) and begins to phase out at $626,350. For married couples filing jointly, the exemption amount increases to $137,000 and begins to phase out at $1,252,700.
For qualifying taxpayers who have three or more qualifying children, the tax year 2025 maximum Earned Income Tax Credit amount is $8,046, an increase from $7,830 for tax year 2024. The revenue procedure contains a table providing maximum EITC amount for other categories, income thresholds and phase-outs.
