The 2024 tax season is upon us, with the national filing date set to start on January 29th. While tax rates remained unchanged, the IRS announced this year’s inflation-adjusted tax brackets in November. But what are these adjustments and what do they mean for our money?
“Marketplace” host Kimberly Adams spoke with Ashlea Ebeling, a personal finance reporter at The Wall Street Journal, to discuss her piece on the 2024 tax bracket changes. Below is an edited transcript of their conversation.
Kimberly Adams: So let’s talk about the changes in 2024. First, what’s going on with the tax brackets?
Ashlea Ebeling: So the tax brackets are adjusted for inflation. And since we’ve seen inflation, they’re wider this year. And that means you can actually have more income before you reach a higher bracket and higher associated rate. So it just gives a little bit more room as people’s incomes hopefully go up with inflation, that they’re staying at that same tax rate, and they’re not getting bumped up into the next bracket.
Adams: Can you give an example of who might see their taxes changed because of this?
Ebeling: Well, you could compare your 2023 bracket to your 2024 bracket. And the most basic example is income up to $11,000 was assessed at the 10% rate for 2023. And then in 2024, that would go up to $11,600.
Adams: So you mentioned that the tax brackets are adjusted for inflation. But in your piece about this, you mentioned that inflation adjustment hasn’t always been calculated the way that it is today, it changed to a slower method in 2017. Can you explain that?
Ebeling: So that’s true. It was in 2017 Congress switched to the slower method of inflation adjustments. And that just means that the brackets aren’t going up as much as they used to. And the Joint Committee on Taxation actually projected that that change would cost Americans $133 billion over a decade, that they’d be paying that much more in taxes.
Adams: When it comes to tax rates, are they locked in, or do they move around over the course of the years?
Ebeling: The current rates, that’s the 10%, up to the 37%. Those rates were set by the 2017 tax overhaul, and they’ll expire at the end of 2025. The rates only change if Congress changes them. The brackets on the other hand are set by Congress. But what changes every year are these inflation adjustments to the brackets to try to keep taxpayers somewhat in the same place where they were the year before.
Adams: So the IRS came out with the tax filing opening date, what overall are some of the big trends and changes that you think regular folks should be looking out for when it comes to doing their taxes this year?
Ebeling: So the big thing to know is January 29th is the filing season start date when individuals can file their return. The due date for most of the nation is April 15. You always have to remember that’s not just the due date to file, but it’s the due date to pay. So that’s even if you request an extension until October 15. You still need to pay by April 15, at least a good faith estimate. For Maine and Massachusetts, because of state holidays, their due date is April 17th.
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