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IRS updates 2024 brackets by 5.4% to counter inflation waves

Tax Season Begins
Posted at 8:21 AM, Nov 17, 2023
and last updated 2023-11-17 11:21:13-05

Inflation has been on the rise, and prices from groceries to gas, keep changing.

“I like to have fresher food to my diet. I try to stay away from processed stuff and I can see even a rise in that price. it’s ridiculous…” Lauren Ashley, resident of Arroyo Grande tells me.

But it’s not just supermarkets that are adjusting their numbers, the IRS once more, has also announced adjustments to tax brackets for the upcoming tax year.

Daniel Rohr, Managing Shareholder and CPA/PFS, EA, M.S. Tax of Rohr & Associates , notes that after last year's 7% increase in tax brackets, they’re expected to see further updates.

"They do it every single year. Last year, at the end of 2022, when they changed it for 2023, it was actually a 7% increase. And so, it matches that inflation has been coming down." Rohr explains.

As outlined in the IRS's Inflation Reduction Act, tax brackets for both individual and married filers will be reduced by approximately 5.4% across various income levels.

Individual and married filers will experience the following tax bracket changes:

  • 10%: Taxable income up to $11,600
  • 12%: Taxable income over $11,600
  • 22%: Taxable income over $47,150
  • 24%: Taxable income over $100,525
  • 32%: Taxable income over $191,950
  • 35%: Taxable income over $243,725
  • 37%: Taxable income over $609,350

Rohr emphasizes that these adjustments result in a lower rate of taxable income, potentially meaning individuals could take home more money.
He provides an example: ”So if you made, as an example, $80,000 in taxable income in 2024, an 80,000 in 2023, the total tax impact because of this change is $255. So it's not a huge impact. But of course, if you made $300,000 as a married couple, it'd be a higher savings on a dollar basis."

The IRS says it’s committed to maintaining a fair and responsive tax system amid economic shifts.

And Rohr anticipates that taxpayers might feel the impact of the 7% inflation update more significantly in the 2023 tax season than the upcoming 5% adjustment.

Looking ahead, Rohr speculates that a further decline in inflation could result in less drastic adjustments to tax brackets.

Ashley shares that sentiment, hoping that such adjustments will contribute to increased consumer spending and economic growth.

"If you're thinking about like macroeconomics, more money in your pocket, you're going to have more availability to spend. You're going to be a stronger consumer." Ashley That should stimulate our economy to grow, hopefully.”