What to know about the new IRS tax brackets for 2024 — and who stands to gain

The Internal Revenue Service’s new federal income tax brackets and standard deductions took effect Monday, providing a boost to many people via slightly higher, inflation-adjusted paychecks.

The IRS adjustments increased federal tax brackets by 5.4% for each type of filer for 2024-2025 in a bid to account for the impact of inflation.

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The changes were first announced by the IRS in its annual adjustment report published last month.

The IRS adjusts tax brackets each year to help combat inflation and higher consumer prices. These adjustments are crucial to prevent so-called bracket creep, the phenomenon that occurs when inflation pushes taxpayers into a higher income bracket than they should be in due to higher cost of living.

The tax inflation adjustments will apply to tax returns filed in 2025, the IRS said in its report.

The IRS also increased the standard deduction for individuals and married couples. Single taxpayers can now claim $14,600 in their annual tax returns, up from $13,850 in 2023, the tax agency said.

Meanwhile, the standard deduction for married couples filing joint returns has increased to $29,200 — a $1,500 bump from 2023.

The IRS also made other changes in its annual adjustment report, including to Social Security benefits, which increased by 3.2% compared to 2023.

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It also announced changes to its qualified transportation and qualified parking benefits and increased the amount of money employees can direct into their flexible spending accounts.

Meanwhile, the IRS announced a $23,000 cap on employee contributions to 401(k), 403(b), and certain 457 plans — a $500 increase compared to the previous year.