Now that the end of this year 2023 is very close, the United States IRS has announced that we will encounter new Tax Brackets from January. This means that for the 2025 tax return we will have to take into account these new rules.
If we do our Tax Return ourselves we should always send to the IRS all the documentation with everything related to our taxes. And in case there are changes, as will happen for the next year 2024, we must pay special attention. It is usual that these changes occur every year, especially in years with a lot of inflation.
Even so, the important thing in these cases is that we are clear about what the new Tax Brackets will be and what we must do to comply with them perfectly. The tax issue is something very serious and in case we do not understand 100% everything we should do, the best thing to do is to seek help from professionals who can facilitate the submission of the Tax Return to the IRS.
NEW TAX BRACKETS FOR 2024 BY THE IRS
Even though we have Tax Brackets that have increased less than last year the figure is still unusual. In 2024 we will see an increase of 5.4%, which is not as high as the 7% in 2023 but still high.
As usual in these cases, to calculate the Tax Bracket increase the IRS makes use of the CPI. This aspect is also taken into account for the COLA increase on Social Security checks, for example.
Starting next year 2024, the Tax Brackets will be as follows. This list is for single taxpayers filing individually:
- 37% for annual returns over $609,350.
- 35% for annual returns over $243,725.
- 32% for annual returns in excess of $191,950.
- 24% for annual returns in excess of $100,525.
- 22% for annual returns in excess of $47,150.
- 12% for annual returns over $11,600.
- 10% for annual returns of $11,600 or less.
In the case of a married couple filing a joint return with the IRS, the following tax brackets apply:
- 37% for annual returns over $731,200.
- 35% for annual returns over $487,450.
- 32% for annual returns over $383,900.
- 24% for annual returns in excess of $201,050.
- 22% for annual returns in excess of $94,300
- 12% for annual returns greater than $23,200
- 10% for annual returns of $23,200 or less
As you can see, returns will have higher Tax Brackets in the upcoming 2024. In addition to that, the IRS has also changed several tax-related issues.
WHAT IS THE MARGINAL TAX RATE?
Even if a person reaches the highest Tax Bracket this does not mean that he or she will always have to pay the highest percentage of taxes. Each tax bracket is tied to a different percentage. That is, if you take the example of a single citizen earning $60,000, not all of the $60,000 per year is taxed at 22%.
The first $11,600 will be taxed at 10%, the money up to $47,150 will be taxed at 22% and the rest will be taxed at 24%. Therefore, not all the money will have the highest percentage of tax. This can be very convenient for citizens who send their Tax Return to the IRS every year.
However, citizens who do not understand 100% what to do with their taxes should contact an advisor for help. This can be very important because this help in sending the documentation to the IRS can not only save you money, but it can also help you avoid big problems.