Changes to the standard deduction — which is used by filers who don’t itemize their deductions to lower their taxable income — apply to 2024 earnings, so filers won’t see them until they’re doing their taxes in early 2025.
The IRS also raised thresholds for its seven tax brackets by 5.4 percent for 2024, meaning a single person will be able to earn $609,350 before being taxed at the highest tax rate of 37 percent.
After record-high inflation last year, the Federal Reserve has succeeded in blunting price increases in recent months. But the consumer price index, which is tied to these tax changes, has continued to rise, if at a slower pace.
The IRS adjusts many other numbers in the tax code for inflation. The maximum Earned Income Credit that a low-income worker with children can receive from the government will go up to $7,830, a $400 increase. Workers will be allowed to put more money into health savings account, up to $3,200.
The estate tax threshold will also rise, allowing estates under $13.61 million to be tax-free (up from $12.92 million in 2023), and the gift tax threshold will rise to $18,000 (a $1,000 increase) on the price of gifts that can be given without a tax impact for the giver.