The Internal Revenue Service (IRS) is set to update the tax brackets for the year 2024, reflecting the customary annual adjustments for inflation. These adjustments, which are closely tied to the consumer price index that gauges the cost of household goods and services, serve to alleviate the tax burden that could arise due to inflation.
The previous year saw tax brackets escalate by an unusual 7%, a direct response to the highest inflation rates in over four decades. This year, with inflation rates somewhat easing, the tax bracket increase is expected to be around 5.4%, according to predictions by tax experts like Steve Grodnitzky of Bloomberg Tax. The intent behind these adjustments is to curb "bracket creep," a phenomenon where taxpayers are nudged into higher tax brackets solely due to inflation, not because of an actual increase in their standard of living.
Such bracket adjustments mean that taxpayers may enjoy more of their income being taxed at a lower rate. For example, if the single filer’s lower bracket limit was $22,000 in 2023, this limit is estimated to rise to about $23,200 for 2024, potentially resulting in tax savings for individuals. These forthcoming changes are a part of the IRS's ongoing efforts to ensure that taxes accurately reflect economic conditions and provide some measure of relief to taxpayers.