Planning your taxes for the upcoming years? Take a sneak peek at the latest standard deductions and tax brackets for the tax years 2023 and 2024.
Reminder:
Tax Year 2023: File in April 2024 (or October 2024 with an extension).
Tax Year 2024: File in April 2025 (or October 2025 with an extension).
How does the standard deduction work?
The standard deduction is a valuable tool that can reduce your taxable income when filing your tax return. Updated annually for inflation, the standard deduction varies based on your filing status. However, it's important to note that certain taxpayers cannot claim the standard deduction if they choose to itemize their deductions instead.
Example:
If you earned $98,850 in 2023 and file as a single taxpayer, taking the standard deduction of $13,850 will reduce your taxable income to $85,000.
standard deductions
Filing Status | 2024 Standard Deduction | 2023 Standard Deduction |
Single/ Married Filing Separately | $14,600 | $13,850 |
Married Filing Jointly/ Qualifying Surviving Spouse | $29,200 | $27,700 |
Head of Household | $21,900 | $20,800 |
Dependent | $1,300 | $1,250 |
65+ Age or Blindness Married/Surviving Spouse | $1,550 | $1,500 |
65+ Age or Blindness Single/Head-of-household | $1,950 | $1,850 |
Source: IRS
Key points you need to know before calculating your tax liability:
1. Tax brackets determine the tax rate you pay on your highest dollar of taxable income.
2. This doesn't mean the entire income gets taxed at that rate.
3. Each bracket has its own tax rate, applied only to the income within that range.
2023 tax brackets
Tax rate | Single | Married filing separately | Married filing jointly |
37% | $578,126 or more | $346,876 or more | $693,751 or more |
35% | $231,251 to 578,125 | $231,251 to 346,875 | $462,501 to 693,750 |
32% | $182,101 to 231,250 | $182,101 to 231,250 | $364,201 to 462,500 |
24% | $95,376 to 182,100 | $95,376, to 182,100 | $190,751 to 364,200 |
22% | $44,726 to 95,375 | $44,726 to 95,375 | $89,451 to 190,750 |
12% | $11,001 to 44,725 | $11,001 to 44,725 | $22,001 to 89,450 |
10% | $0 to 11,000 | $0 to 11,000 | $0 to 22,000 |
Example Scenario for 2023
After taking the deduction, your taxable income is $85,000 as a single filer, falling under the 22% bracket. However, you won't pay it on your entire income. Here's how the calculation breaks down:
10% on the first $11,000=$1,100.
12% on amounts between $11,001 and $44,725=$4,047.
22% on the amounts between $44,726 and $95,375. Since your income is $85,000, only $40,275 ($85,000 - $44,726+1) will be taxed at 22%, amounting to $8,860.50.
Therefore, your total tax liability for 2023 would be $14,007.50 ($1,100 + $4,047 + $8,860.50).
2024 tax brackets
Tax rate | Single | Married filing separately | Married filing jointly |
37% | $609,351 or more | $365,601 or more | $732,201 or more |
35% | $243,726 to 609,350 | $243,726 to 365,600 | $487,451 to 731,200 |
32% | $191,951 to 243,725 | $191,951 to 243,725 | $383,901 to 487,450 |
24% | $100,526 to 191,950 | $100,526 to 191,950 | $201,051 to 383,900 |
22% | $47,151 to 100,525 | $47,151 to 100,525 | $94,301 to 201,050 |
12% | $11,601 to 47,150 | $11,601 to 47,150 | $23,201 to 94,300 |
10% | $0 to 11,600 | $0 to 11,600 | $0 to 23,200 |
Staying informed about the latest rules is essential for effective tax planning. As always, if you need help with your tax filing, don't hesitate to contact us. Our team of knowledgeable Certified Public Accountants (CPAs) is ready to provide expert guidance.
Copyright © 2023 by Del Sol CPA Services
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