January 8, 2024
Mo’ Money: IRS’ Tax Bracket Changes May Mean More Money For You
More money is always a good thing!
The IRS released the federal income tax brackets for 2024, meaning there may be more money in your paycheck, CNBC reports.
The top tax rate will remain at 37% in 2024, but the earnings thresholds for each tier will go up about 5.4% higher, thanks to inflation. If you experience similar wages from last year, the adjustment could result in a slight paycheck increase, depending on your withholdings. Your federal and state paycheck withholdings affect how much you pay in taxes throughout the year. Taxpayers can expect a refund if they’ve overpaid or a tax bill if they haven’t paid enough.
The federal income tax brackets show how much is owed on each portion of your “taxable income,” usually calculated by subtracting the higher of the standard or itemized deductions from your adjusted gross income. Standard deduction increased for inflation, going up to $14,600 for single filers from $13,850 in 2023. For married couples, filing together could prompt a claim of $29,200 from $27,700.
The head of households may see their standard deduction jump to $21,900 in 2024, up from $20,800, according to Fox Business.
Yearly inflation dropped slightly in November 2023, but Americans are still feeling the wrath of rising costs such as housing and car insurance. Roger Stinnett, certified financial planner and managing director of wealth planning for First Foundation Advisors, recommends keeping a continuous eye on your finances because the constant changes can make things confusing. “You always want to keep a running total in your mind of how your income is changing because it’s complex,” he said.
Other tax provisions increased through the IRS, including the earned income tax credit amount. Families will be eligible to get close to $8,000 with three or more qualifying kids–an increase from $7,430 for tax year 2023. Employees will see health benefits as increases can cause a higher contribution to their health-flexible spending accounts, with the maximum contribution increasing from $150 to $3,200.
There are still a few things to keep an eye on this upcoming tax season. Your paycheck may have increased in 2024, but “new tax changes could still place you in a lower or higher bracket,” warned Mariner Wealth Advisors Director Ashton Lawrence. According to Stinnett, one “quick check” could be last year’s tax return. A large refund or balance should signal time to review withholding.
As always, taxpayers should keep track of tax law and life changes, including marriage, divorce, the birth or adoption of a child, retirement, buying a home, filing for bankruptcy, and more, which may affect your situation and adjust your paycheck withholding.
