In an effort to alleviate the financial stress caused by persistent high inflation, the IRS has announced a series of adjustments to the standard deductions and tax brackets for the tax year 2024. The changes, intended to provide taxpayer relief, will see standard deductions rise across all filing statuses. Married couples filing jointly will benefit from an increased standard deduction of $29,000, while single filers and heads of households will see their standard deductions rise to $14,600 and $21,900 respectively.
These revisions come alongside updates to the tax brackets for 2024. The top income tax rate of 37% will now apply to individuals earning over $609,350. This is an increase from the previous threshold of $578,125. On the other end of the spectrum, the lowest tax rate of 10% will apply to single filers with incomes of $11,600 or less and married couples earning $23,200 or less.
The IRS's announcement today aligns with recent comments made by Federal Reserve Chair Jerome Powell at an IMF panel on Thursday. Powell highlighted the potential for an upcoming interest rate hike in December as part of the Fed's ongoing efforts to manage inflation. While the IRS's adjustments offer some relief against inflationary pressures, Powell's remarks suggest that Americans could face higher borrowing costs in the near future.
Taxpayers can expect these changes to be reflected in their taxes due in April 2025. As households continue to navigate through an economy marked by high inflation rates, these fiscal measures aim to provide some respite while balancing the broader economic challenges at hand.
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