In November, the IRS announced higher tax brackets for 2024, allowing Americans to take home a larger portion of their income.
These increases are more substantial than in prior years due to recent high inflation rates. Although inflation has decreased over the past year, it remains above the Federal Reserve’s target of 2%.
The new guidelines are intended to prevent “bracket creep,” which occurs when wages go up but people see no corresponding rise in their standard of living due to higher prices on goods and services.
The Internal Revenue Service (IRS) has announced a rise in the standard deduction for married couples from $27,700 to $29,200. Individuals will see their standard deduction increase from $13,850 to $14,600.
According to Fox Business, these changes are expected to result in an average 5.4 percent boost in take-home pay for households. Additionally, the Alternative Minimum Tax exemption is set to increase to $85,700 and phase out at a rate of $609,350 in 2024 instead of the 2023 rate of $578,150.
The Internal Revenue Service (IRS) is expected to make several changes in 2024 that will help taxpayers cover health care expenses.
The maximum Earned Income Tax Credit amount for taxpayers with three or more qualifying children for 2024 will be $7,830, an increase of $400 from the current rate.
Additionally, contribution limits for Flexible Spending Accounts will also be increased to $3,200, a jump of $150.
For Health Savings Accounts (HSAs), single taxpayers will be allowed to contribute up to $4,150, representing a 7.8% increase; families may contribute up to $8,300 which marks a 7.1% rise from the existing limit.
Participants with a Medical Savings Account and self-only coverage will see an increase of $250 from 2023, with a maximum out-of-pocket expense amount set at $5,550.
For families with the same coverage option, the rate limits are expected to rise to $10,200 in 2024. Furthermore, the IRS has confirmed that the personal exemption tax rate for 2024 will remain unchanged at zero according to the Tax Cuts and Jobs Act.
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