IRS Makes Big Changes to Income Guidelines

The United States’ inflationary problems are far from over. Families have been struggling to pay for practically everything for more than two years. Rent, housing, food, medicine, and nearly every other commodity or service have all suffered price increases. Provincial and federal governments have made initiatives to lessen the impact of the crisis on families. That will be clear in 2024, when Americans file their taxes for the current fiscal year.

Marginal Tax Rates

The IRS indicated late last year that it will be making inflation adjustments to hundreds of tax rules, including tax rate schedules. Individuals earning more than $578,125 and married couples filing jointly earning more than $693,750 will continue to pay the highest tax rate of 37%. The followings are the other income groups and percentages:

• Individuals who earn less than $11,000 and married couples who make less than $22,000 pay 10%.
• Individuals who earn more than $11,000 and married couples earning over $22,000 will pay 12%.
• Single people making over $44,725 and married couples earning more than $89,450 will pay 22%.
• People making more than $95,375 and married couples earning over $190,750 are responsible for more than 24%.
• Individuals earning more than $182,100 and married couples earning more than $364,200 owe 32%.
• Individuals earning more than $231,250, as well as married couples earning more than $462,500, will pay 35%.

Standard Deduction

Married couples filing jointly in 2023 will get a standard deduction of $27,700, an increase of $1,800 from 2022. The deduction for heads of households will increase by $1,400 to $20,800. In addition, the standard deduction for married couples filing separately and single taxpayers will increase by $900 to $13,850.

Earned Income Tax Credit

The maximum EITC payout for taxpayers with three or more qualified dependent children will be $7,430. This is a tax credit that assists low- to middle-income households in lowering their tax burden and, in some cases, increasing the amount of their tax return.

Medical Savings Account

People with a self-only Medical Savings Account must have an annual deductible of at least $2,650. This represents a $200 increase from 2022. In addition, the deductible cannot exceed $3,950, a $250 increase from the previous year. The deductible for families cannot be less than $5,300 or more than $7,900. It is a $350 and $500 rise, respectively.

Miscellaneous Tax Changes

The monthly maximum for qualifying parking plus the qualified transportation fringe benefit rises from $280 in 2022 to $300 in 2023, an increase of $20. The Alternative Minimum Tax exemption for this year is $81,300, but it phases out for individuals earning $578,150 and married couples filing jointly earning $1,156,300.

Anyone with questions about their deductions or burdens should contact a professional.