IRS releases tax brackets, inflation adjustments for 2024
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The Internal Revenue Service released its annual inflation adjustments Thursday for the 2024 tax year that will boost paychecks and lower income tax for many Americans.
Why it matters: Cost of living adjustments like those on taxes and Social Security payments are seen as crucial, especially as consumers deal with inflation, even if lower than the super-high rates seen in 2022.
The big picture: The new tax adjustments apply to tax returns filed in 2025 and the IRS also changed 2024 tax withholding tables, which determine how much money employers should withhold from employee wages in paychecks for federal taxes.
Income tax brackets 2024
Context: By adjusting the tax brackets — as the IRS does every year — it is attempting to stop "bracket creep," which happens when inflation pushes taxpayers into a higher income tax bracket without an increase in real income. (See chart above.)
Tax deductions for 2024 tax year
Details: The 2024 tax year standard deduction for married couples filing jointly will be $29,200, a $1,500 increase from $27,700 for the 2023 tax year.
- For single taxpayers, the standard deduction is $14,600, an increase of $750 from the 2023 deduction of 13,850.
- For heads of households, the standard deduction will be $21,900, an increase of $1,100 from the amount for tax year 2023.
Social Security increase 2024
Retirement and disability benefits will increase by 3.2% and more than $50 a month on average starting in January, the Social Security Administration announced Oct. 12.
Yes, but: The cost of living adjustment that affects more than 71 million recipients of Social Security retirement and disability benefits is much smaller than in the last two years.
- The COLA increase for 2023 was a historic 8.7% increase and the 2022 rate was 5.9%.
FSA contribution limit 2024 increase
Between the lines: The IRS also announced Thursday that it was raising the limit for 2024 contributions to health flexible spending arrangements to $3,200, up from $3,050 for 2023.
401(k), IRA contribution limit increases for 2024
Americans can contribute up to $23,000 into 401(k), 403(b) and most 457 plans — $500 more than the $22,500 contribution limit for 2023, the IRS announced Nov. 1 in a news release.
- The limit on annual contributions to an IRA increases t0 $7,000, up from $6,500.
Meanwhile, The IRA catch‑up contribution limit for individuals aged 50 and over remains at $1,000 for 2024, the IRS said.
- For 401(k) and most other plans, the catch-up contribution limit for employees 50 and over is $7,500 for 2024.
Of note: The income ranges for determining eligibility to make deductible contributions to traditional IRAs, to contribute to Roth IRAs and to claim the Saver's Credit all increased for 2024, the IRS said.
Editor's note: This story was updated to include the 2024 FSA contribution limits and increased limits for retirement accounts like 401(k) and IRA accounts.
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