To many of us, taxes are one of those things in life that we wish did not exist and could just be ignored. However, the fact of the matter is that tax laws are not stagnant; they change from time to time and this is important to know especially when it comes to your salary. As the IRS releases adjustments for the 2024 tax year, many Americans are now asking themselves how they will be taxed in 2025. These changes include the new tax brackets and income limits that would determine how much of your income will be taxed next year.
Understanding the IRS Updates for 2024 Salaries
Every year, the Internal Revenue Service (IRS) changes the tax brackets, deductions, and credits to reflect the general inflation rate. This is done to prevent taxpayers from being subjected to higher tax rates just because the cost of living is increasing. There are some changes that have been made by the IRS for the 2024 tax year that will affect the salaries taxed in 2025. Whether you’re an employee or self-employed, these changes will determine the portion of your income subject to different tax rates.
Changes to the 2024 Tax Brackets
Below are the new tax brackets that will be in place for the fiscal year 2024 and which will come into effect when filing taxes in 2025. The changes are a minor raise in the income limits compared to 2023:
- 10% Tax Bracket: For single filers, this applies to income up to $12,850. For married couples filing jointly, it applies to income up to $25,700.
- 12% Tax Bracket: Income from $12,851 to $53,400 for single filers and $25,701 to $106,800 for married couples.
- 22% Tax Bracket: For single filers, the income range is between $53,401 and $114,000, and for married couples, it is between $106,801 and $228,000.
- 24% Tax Bracket: For single filers, the range is $114,001 to $219,700, and for married couples, $228,001 to $439,400.
- 32% Tax Bracket: For single filers, it is between $219,701 and $541,900 and for married couples, it is between $439,401 and $651,000.
- 35% Tax Bracket: For single filers, the income range is from $541,901 to $1,000,000, and for married couples, the income range is from $651,001 to $1,000,000.
- 37% Tax Bracket: Applies to income over $1,000,000 for both single filers and married couples.
These changes imply that more of your salary may be taxed at a lower rate than before. If you got a salary increment in 2024 and your income still falls in the same tax bracket, you may be paying fewer taxes than you anticipate.
Standard Deduction Increases for 2024
Another critical change that the IRS has announced is the increase in the standard deduction that assists in lowering the taxable amount of income. For the 2024 tax year, the standard deduction has been increased to the following amounts:
- Single filers: It rises to $14,100 (from $13,850 in 2023).
- Married couples filing jointly: $28,200 (up from $27,700 in 2023).
This increase will give more relief to taxpayers by decreasing their taxable income and thus more Americans will be able to keep more of their income. It is a relief, especially for those who are struggling to make ends meet due to the increasing cost of living.
How Will These Changes Affect Your 2025 Taxes?
From the IRS 2024 salaries tax changes, it can be noted that if nothing changes with the income rate, most taxpayers will be subjected to a reduced tax rate in 2025. The changes to the tax brackets and standard deduction are designed to counter the effects of rising inflation that can push people into higher tax brackets, known as ‘Bracket Creep’.
However, it is equally important to realize that even with these changes, there are other aspects that can still affect your total tax burden. For example, changes in your deductions, credits, and even your personal information, like your marital status or dependents, can change the amount of taxes you will have to pay.