US News
Goodbye to the IRS’s tax brackets: Here Are the new limits that will boost your savings in January 2025
The IRS has announced the tax brackets that it will use during next year’s tax season, helping some workers to save money.
Tax season is approaching rapidly, with the US Internal Revenue Service (IRS) set to begin processing tax returns at the end of January.
Each year, the IRS adjusts the tax brackets, which are based on earnings, for inflation. Thus, as incomes grow or shrink, so do the tax brackets, which determine the percentage of worker earnings sent to the federal government.
The US uses a ‘progressive’ tax system where those who earn more are taxed more than those who earn less when it comes to taxes levied on income generated through employment. Regressive systems, in contrast, are more similar to sales taxes where all income earners pay the same tax rate.
The tax rates for income generated in 2024 are around five percent higher than last year. By increasing the tax brackets, workers can avoid being bumped up to a higher tax bracket if they receive a slight pay increase.
2024 Tax Brackets for the 2025 Tax Filing Season
- 10% for incomes under $11,600 or less ($23,200 for married couples filing jointly).
- 12% for incomes over $11,600 ($23,200 for married couples filing jointly)
- 22% for incomes over $47,150 ($94,300 for married couples filing jointly)
- 24% for incomes over $100,525 ($201,050 for married couples filing jointly).
- 32% for incomes over $191,950 ($383,900 for married couples filing jointly)
- 35% for incomes over $243,725 ($487,450 for married couples filing jointly)
- 37% for incomes greater than $609,350 ($731,200 for married couples filing jointly).
What is often misunderstood about the tax system is that a worker’s income is not subject to one tax rate. Let’s look at an example: Imagine the case of Penny, who in 2024 will have an annual pre-tax income of $86,580. This figure is based on median weekly earnings for the third quarter of this year, as reported by the Bureau of Labor Statistics.
Calculating your tax bill
If the IRS were to tax Penny’s total income by twenty-two percent, the rate at which income between $47,150 and $100,525 will be taxed in 2024, she would pay the federal government $19,047.
However, this is not the way the calculation is made.
For the 2024 tax filing season, the first $11,600 earned will be taxed at 10 percent, for a total of $1,600. Then, a 12 percent tax will be levied against the amount between $11,600 and $47,150, equaling $4,266. Lastly, because Penny’s income does not exceed $100,525, a 24 percent tax will be applied to the worker’s remaining income ($39,430), for a total of $8,674, bringing her total tax bill to $14,540. This figure does not take into consideration any taxes paid to Social Security or to the state government.
What will be the standard deduction for the 2024 tax season?
Like the tax brackets, the standard deduction also changes from year to year. For the 2024 tax season, the IRS will offer a standard deduction of:
- $14,600 for single filers or married filers who file separately (+$750 from 2023);
- $29,200 for married couples filing jointly (+$1,500 from 2023); and
- $21,900 for those who file as heads of household (+$1,100 from 2023).
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