December is a good time of the year for you to think about your tax planning. For 2024 and 2025, tax brackets play a huge role in maximizing your deductions, estimating your liability, or simply keeping you up to date. Your tax brackets and the amounts of standard deductions will change with inflation. All these will be reflected in your filing plans.
What are the 2024 tax brackets?
Below are the seven tax brackets outlined by the IRS for 2024:
- 37%: For single filers with income over $609,350 and married couples filing jointly earning over $731,200.
- 35%: For single filers earning more than $243,725 and married couples filing jointly with income over $487,450.
- 32%: For single filers earning over $191,950 and married couples filing jointly with income over $383,900.
- 24%: For single filers earning more than $100,525 and married couples filing jointly with income over $201,050.
- 22%: For single filers earning more than $47,150 and married couples filing jointly with income over $94,300.
- 12%: For single filers earning more than $11,600 and married couples filing jointly with income over $23,200.
- 10%: For single filers who are earning above $11,600 and married couples filing jointly earning at least $23,200.
These brackets apply to your taxable income, which is your total income minus deductions and exemptions.
What are the key standard deductions for 2024?
Here are a number of standard deductions for 2024:
- Single filers and married filing separately: $14,600 (up from $750 in 2023).
- Married couples filing jointly: $29,200 (up from $1,500 in 2023).
- Heads of households: $21,900 (up from $1,100 in 2023).
Are there other important changes for 2024?
Yes, here are a number of changes:
- Alternative Minimum Tax (AMT): The AMT exemption has increased to $85,700 for single filers (phases out at $609,350) and $133,300 for married couples filing jointly (phases out at $1,218,700).
- Earned Income Tax Credit (EITC): The maximum credit for taxpayers with three or more qualifying children is $7,830, an increase of $400 from 2023.
- Health Savings Account (HSA) Contributions: The limit for self-only coverage is now $3,200, and for family coverage, it is $10,200.
These adjustments are crucial for optimizing your tax strategy, especially if you fall into specific income or deduction categories.
What are the tax brackets for 2025?
The IRS has also released tax brackets for 2025, which will apply when you file in 2026. These reflect further adjustments for inflation:
- 37%: Single filers with income over $626,350 and married couples filing jointly earning over $751,600.
- 35%: Single filers earning over $250,525 and married couples filing jointly earning more than $501,050.
- 32%: Single filers earning over $197,300 and married couples filing jointly earning over $394,600.
- 24%: Single filers earning over $103,350 and married couples filing jointly earning over $206,700.
- 22%: Single filers earning over $48,475 and married couples filing jointly earning over $96,950.
- 12%: Single filers earning over $11,925 and married couples filing jointly earning over $23,850.
- 10%: Single filers earning up to $11,925 and married couples filing jointly earning up to $23,850.
How do these changes affect your year-end tax planning?
- Maximize retirement contributions: Contributions to accounts like 401(k)s can lower your taxable income.
- Harvest tax losses: Offset gains by selling investments at a loss.
- Plan for deductions: Group expenses strategically to exceed the standard deduction threshold.
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Filing your tax return on IRS – Here’s how to avoid the most common mistakes that cause big problems
Filing your tax return on IRS – Here’s how to avoid the most common mistakes that cause big problems
