New IRS tax brackets take effect in 2024, meaning your paycheck could be bigger next year December 26, 2023 9:00am EST
New IRS tax brackets take effect in 2024, meaning your paycheck could be bigger next year
Tax brackets to shift higher by 5.4% in 2024
By Megan Henney FOXBusiness
Higher federal income tax brackets and standard deductions will take effect at the beginning of January, potentially giving Americans a chance to increase their take-home pay in 2024 and shield more of their income from the IRS.
The IRS announced the higher limits for the federal income tax bracket and standard deductions in November. The increase is intended to avoid a phenomenon known as "bracket creep," which happens when taxpayers are pushed into higher-income brackets even though their purchasing power is essentially unchanged due to steeper prices for most goods.
The IRS makes such adjustments annually, but in times of high inflation, the increases are more significant and impactful for taxpayers. Although inflation has fallen considerably over the past year, it remains higher than both the pre-pandemic average and the Federal Reserve's 2% target.
This year, the tax brackets are shifting higher by about 5.4%.
The higher thresholds where tax rates take effect could mean savings for millions of Americans across all income brackets.
Here are the changes unveiled by the IRS. The inflation-adjusted elements will apply to the 2024 tax year, meaning returns filed in 2025.
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