Tax Brackets 2024: what do I need to know
Discover the federal income brackets for 2024 and why they have changed. See what this means for your tax filing and how your calculated AMT threshold may affect your filing.
Summary
When it comes to federal income tax brackets, the only constant is change.
The Internal Revenue Service (IRS) updates them annually to account for inflation and filing status.
Income tax bracket adjustments prevent “bracket creep” and ensure only “real income” is assessed.
A financial advisor can help you develop a tax plan that works for you.
2024 tax brackets
Federal tax bracket categories refer to the different income ranges subject to different tax rates under the United States federal income tax system.
The tax system in the US is a progressive tax system, which means that as your income increases, you move into higher tax brackets and pay a higher percentage of your income in taxes.
There are generally seven federal tax brackets, each with its own tax rate — the last date you had to file a return this year was 18 April 2024.
Not sure if you need to file? No problem; you can use the free tool on the IRS website.
The brackets and federal tax rates for 2024 are as follows:
| Tax rate | Single | Married filing jointly | Married filing separately | Head of household |
|---|---|---|---|---|
| Tax rate | Single | Married filing jointly | Married filing separately | Head of household |
| 10% | $0 to $11,600 | $0 to $23,200 | $0 to $11,600 | $0 to $16,550 |
| 12% | $11,601 to $47,150 | $23,201 to $94,300 | $11,601 to $47,150 | $16,551 to $63,100 |
| 22% | $47,151 to $100,525 | $94,301 to $201,050 | $47,151 to $100,525 | $63,101 to $100,500 |
| 24% | $100,526 to $191,950 | $201,051 to $383,900 | $100,526 to $191,950 | $100,501 to $191,950 |
| 32% | $191,951 to $243,725 | $383,901 to $487,450 | $191,951 to $243,725 | $191,951 to $243,700 |
| 35% | $243,726 to $609,350 | $487,451 to $731,200 | $243,726 to $365,600 | $243,701 to $609,350 |
| 37% | $609,351 or more | $731,201 or more | $365,601 or more | $609,350 or more |
Marginal taxation
Here’s where it gets interesting.
Say you earn $50,000 annually; it’s not simply a case of finding the $50k tax bracket and deducting 22% of $50,000.
Here in the US, we use a marginal taxation system, meaning that on a salary of $50,000, you would apply a 10% rate to the first $11,600 of taxable income, 12% on the next $35,549 and then only the higher rate of 22% on the final $2,850.
These calculations can be a lot to wrap your head around, but this is where experienced tax professionals can help.
What is the standard deduction for 2024?
To determine your federal income tax liability, you would first calculate your taxable income by subtracting any deductions and exemptions from your gross income.
One of these is the standard deduction. This is a portion of income that you don’t pay federal taxes on. The IRS sets it each year.
So, what is the standard deduction for 2024?
According to the IRS, the standard deduction for 2024 is as follows:
Single or Married Filing Separately — $14,600
Married Filing Jointly or Qualifying Surviving Spouse — $29,200
Head of Household — $21,900
Why is filing status important?
Your filing status relates to whether you are single, married, or a “head of household.”
For single taxpayers and married individuals filing separately, the standard deduction will rise to $14,600 for 2024, up $750 from 2023.
For heads of households, the standard deduction will be $29,200 for the tax year 2024, up $2,100 from the amount for the 2023 tax year,
What are the AMT thresholds for 2024?
The Alternative Minimum Tax (AMT) is a separate tax calculation to ensure that wealthy individuals and corporations pay a minimum level of tax.
The AMT exemption is the amount of income exempt from the AMT calculation. It is the amount of income that a taxpayer can earn before the AMT applies.
For the 2024 tax year, the AMT exemption is $85,700 for taxpayers filing as single and $133,300 for married couples filing jointly.
How do I calculate my effective tax rate?
To calculate your effective tax rate, you need to know your total income and the total taxes you paid for the year.
Use the following four-step process to help calculate your effective tax rate:
Add up all your sources of income for the year, including your salary, bonuses, investments, and any other income you received.
Subtract any deductions or exemptions you're eligible for, such as contributions to a retirement plan or charitable donations.
Calculate your total tax liability using the tax brackets and rates that apply to your income level. You can find this information on the IRS website or consult a tax professional.
Divide your total tax liability by your taxable income to determine your effective tax rate. For example, if your taxable income was $50,000 and your total tax liability was $8,000, your effective tax rate would be 16%.
Remember that this is just an estimate of your overall tax rate and may not reflect your actual tax burden due to the many factors that can impact your tax liability, such as AMT or other deductions, credits, and exemptions.
Get expert financial advice
Calculating your tax rates and knowing when and what you must file can be tricky. For real peace of mind, a professional financial advisor can help guide you through the process.
Unbiased can assist you with finding the right financial advisor for your needs today.
Senior Content Writer
Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.