WASHINGTON — With the New Year comes new tax brackets, and Americans could see their paychecks change as the IRS tries to adjust brackets to deal with inflation.
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You’re about to increase your take-home pay without getting a raise. The IRS put in place higher limits for federal income tax brackets this year, which means Americans will be able to shield more of their income from the tax man.
Preston Brashers with Heritage Foundation Tax Policy said, “In general, it means that everyone should expect that if they have withholding on their paychecks, they’re going to have a little bit less withheld.”
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Brackets are increasing by about 5.4% for both individual and married filers. The top tax rate remains at 37% for 2024, and that starts at $609,350.
The reason for the change? To avoid “bracket creep” when inflation pushes people into higher tax brackets, but they have little additional purchasing power.
This year’s change, however, won’t fix the problem.
“It’s never going to keep up all the way because what they’re doing is making this one adjustment in the fall or the fall of CPI, but even that doesn’t go into effect until January. So, you have this lag period,” Brashers explained.
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The standard deduction is changing too, rising to $29,000. That’s up from $27,000 for married couples filing jointly. That is a 5.4% jump.
For individuals, the new max will be $14,600, which is up from $13,850. The standard deduction effectively reduces the amount of income you pay taxes on.
The IRS is also increasing the thresholds for several other tax provisions, including the earned income tax credit, with families now eligible to receive $7,830 if they have 3 or more qualifying children.
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