What are the IRS tax brackets? What are the new federal tax brackets for 2023? Answers here-LoTradeCoin

What are the IRS tax brackets? What are the new federal tax brackets for 2023? Answers here

2024-12-25 22:18:22 source：lotradecoin fees category：Stocks

With March Madness soon drawing to a close, millions of Americans will turn their attention from NCAA brackets to tax brackets.

Every year, the Internal Revenue Service announces new tax brackets, tiers of income that are taxed at different rates under our nation's progressive tax system. Understanding tax brackets is key to predicting how much tax you owe.

Each tier of income is taxed at a progressively higher rate. You pay the lowest tax rate on the lowest tier of income, a slightly higher rate on the next-higher tier, and so on. The higher your taxable income, the higher your tax rate, but the highest rate applies only to the highest tier of income that you reach.

Tax brackets rise with inflation. The brackets for 2023, reflected on the tax return you file in 2024, are slightly higher than the ones for 2022.

How do tax brackets work?

Let's say you earned $75,000 in taxable income in 2023, and you're single. For the first $11,000 of that income, you'll pay the lowest 2023 tax rate, 10%, on that tier of income. For the tier of income between $11,001 and $44,725, you'll pay a 12% tax rate. For all of your income above $44,726, you'll pay tax at a much steeper rate, 22%.

Protect your assets: Best high-yield savings accounts of 2023

There are seven tax brackets in all, each with a different tax rate.

The IRS uses inflation data to adjust tax brackets for the upcoming tax year. If you got a raise to keep up with inflation in 2023, you probably owe tax at roughly the same rate as in 2022, all else being equal. If your salary rose faster than inflation, you may have crept into a higher tax bracket. If your wages didn't keep up with inflation, you could top out in a lower bracket.

What is income tax?What to know about how it works, different types and more

What is the top tax bracket?

The highest individual tax bracket is 37%. In 2023, it applied to any income beyond $578,125 for single people. For married people filing jointly, the top rate kicks in at $693,750 in income. (For marrieds filing separately, the cutoff is $346,875.)

2023 tax brackets

Here are the 2023 tax brackets, the ones that apply on the tax return you file in 2024:

For individual filers:

◾ 37% for incomes over $578,125.

◾ 35% for incomes over $231,250.

◾ 32% for incomes over $182,100.

◾ 24% for incomes over $95,375.

◾ 22% for incomes over $44,725.

◾ 12% for incomes over $11,000.

◾ 10% for income below $11,000.

For married couples filing jointly:

◾ 37% for income greater than $693,750.

◾ 35% for incomes over $462,500.

◾ 32% for incomes over $364,200.

◾ 24% for incomes over $190,750.

◾ 22% for incomes over $89,450.

◾ 12% for incomes over $22,000.

◾ 10% for income below $22,000.

Head of household tax bracket

For tax purposes, the IRS generally defines a head of a household as a parent who pays for more than half of a household's expenses. Heads of household have higher income thresholds for each tax bracket than individual filers, to account for the additional costs they cover.

The head of household tax brackets for 2023 are:

37% on the portion of income above $578,100.
35% on the portion of income between $231,251 and $578,100.
32% on the portion of income between $182,101 and $231,250.
24% on the portion of income between $95,351 and $182,100.
22% on the portion of income between $59,851 and $95,350.
12% on the portion of income between $15,701 and $59,850.
10% on income below $15,700.

More on taxes:Older adults can save on 2023 taxes by claiming an extra deduction. Here's how to do it.

Tax brackets: 2024 vs 2023

The IRS has already released tax brackets for 2024, the taxes you will file in 2025.

For the top individual tax bracket, the 2024 income threshold was raised from $578,126 to $609,351. This means that more than $30,000 in individual income will be taxed at 35% instead of 37%.

Here are the other 2024 tax brackets for individual filers:

35% for incomes over $243,725.
32% for incomes over $191,950.
24% for incomes over $100,525.
22% for incomes over $47,150.
12% for incomes over $11,600.
10% for income below $11,600.

And here are the 2024 tax brackets for married couples filing joint returns:

37% for income greater than $731,200.
35% for incomes over $487,450.
32% for incomes over $383,900.
24% for incomes over $201,050.
22% for incomes over $94,300.
12% for incomes over $23,200.
10% for income below $23,200.

How can I lower my tax bracket?

There are many ways you can lower your tax bracket. If you're married, filing a joint return with your spouse could qualify you for a lower tax bracket. Or, depending on your income and circumstances, you may lower your tax bracket by filing an individual return.

Another way to lower your tax bracket is by contributing to a 401(k). This will lower your taxable income, which can put you in a lower bracket. If your employer doesn't offer a 401(k), contributions to a traditional Individual Retirement Account could help you qualify for a tax deduction, which could also lower your bracket.

You might also consider taking the standard deduction instead of itemized deductions, a choice that could put you in a lower bracket, depending on your financial situation.