Cost of living adjustments — such as those on taxes, wages and Social Security payments — are crucial as consumers cope with inflation and high prices.
New IRS tax brackets and increased standard deductions go into effect Jan. 1 along with other tax inflation adjustments that include the mileage rate increasing by 1.5 cents a mile and higher contribution limits for tax-deferred retirement plans.
- The tax inflation adjustments apply to tax returns filed in 2025.
The IRS also changed 2024 tax withholding tables, which determine how much money employers should withhold from employee wages in paychecks for federal taxes.
The IRS adjusts tax brackets every year in an attempt to stop “bracket creep,” which happens when inflation pushes taxpayers into a higher income tax bracket without an increase in real income.
The 2024 tax year standard deduction for married couples filing jointly will be $29,200, a $1,500 increase from $27,700 for the 2023 tax year.
- For single taxpayers, the standard deduction is $14,600, an increase of $750 from the 2023 deduction of $13,850.
- For heads of households, the standard deduction will be $21,900, an increase of $1,100 from the amount for tax year 2023.
Americans can contribute up to $23,000 into 401(k), 403(b) and most 457 plans — $500 more than the $22,500 contribution limit for 2023, the IRS said in a November news release.
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