Alterations to the standard deduction, utilized by those who don’t itemize their deductions to lower their taxable income, will be effective for 2024 earnings, reflected in the 2025 tax season.
The IRS has also raised the income thresholds for its seven tax brackets by 5.4 percent for 2024, allowing single individuals to earn up to $609,350 before being taxed at the top rate of 37 percent.
Following last year’s record-high inflation, the Federal Reserve has managed to mitigate price hikes in recent months. However, the consumer price index, linked to these tax changes, continues to rise, albeit at a slower pace.
The IRS has adjusted numerous other tax code figures for inflation. The maximum Earned Income Credit for low-income workers with children will be raised to $7,830, a $400 increase. Workers can also contribute more to health savings accounts, up to $3,200.
The estate tax threshold will increase, allowing estates under $13.61 million to be exempt from tax (up from $12.92 million in 2023), and the gift tax threshold will rise to $18,000 (a $1,000 increase) for tax-free gifts.
