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The IRS has just announced the new tax brackets that are adjusted for inflation so this is official and it goes into effect for tax year 2024 and I want to tell you.

That this is all a result of inflation so I’m going to tell you what’s happening, How are tax brackets calculated  in 2024 and you tell me if you think that this is fair what the IRS has done.

Then after that I’m going to give you my opinion so let’s start with this I want to give you a simplified example to explain this to you so you know clearly.

IRS announces new tax brackets for 2024

What is going on so here’s the example let’s just say that you make $50,000 a year and let’s say that inflation is so bad and the cost of everything.

All your daily living expenses double so we’re talking about food Health Care insurance rents gasoline everything doubles okay but also your income doubles so your income goes from $50,000 a year.

tax brackets

Now you’re making $100,000 a year so congratulations now the question is financially speaking are you better off off are you worse off or is every does everything end up the same because expenses doubled.

Your income doubles okay so you have to remember that this is a simplified demonstration but the answer would be that you are worse off because How are tax brackets calculated  in 2024 of income taxes because think about.

Your income doubles then you’re going to be in a much higher tax bracket and you’re going to end up paying much more in income taxes so your cost of living will double.

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How often are tax brackets changed?

Pre-tax income will double but after taxes your take-home pay will not double so you are worse off because of inflation it’s for that reason the IRS must adjust the tax brackets.

The tax rates for inflation now with that being said the IRS made the official announcements they’re going to adjust the tax brackets by 5.4% and I want to show you how this is going to affect you and I want you to understand how this works.

tax brackets

I have to say this because a large percentage of Americans still don’t understand how this works if you do know then that’s good but I have to say this because it’s critical to understand in the United States of America.

We have tax brackets the more taxable income that you have the higher that your overall tax rate will be so this is known as a progressive tax system as opposed How are tax brackets calculated  in 2024 to a flat tax system so I want you to take a look at this the first $1,600.

That you make will be taxed at 10% so if you have $11,600 of taxable income you will pay $1,160 to the IRS if you make more than $11,600 then you will enter the 12% tax brackets.

How will inflation affect tax refund in 2024?

So I want to be absolutely clear about this when this happens all of your income will not be taxed at the 12% rate if you have $112,000 of taxable income.

  • Then the first $1,600 that you make will be taxed at the 10% rate and then the remainder the $400 will be taxed at the 12% rate but as you can see the more money that you make.
  • The higher that your overall tax rates is going to be that’s because as you make more money more of your money gets taxed at the higher rates and that’s essentially the issue at hand because you have inflation that’s going on inflation is driving up.
  • The price of everything right all your expenses so you have to make more money just to keep up but that’s the problem because as you make more money you end up in a higher tax brackets.
  • Then you end up paying more in taxes so here’s the inflation adjustment that the IRS made for 2024 it is a 5.4% increase across all tax brackets and the question is is that good enough so let me know.

What you think so I want to show you what’s going on look at the difference from 2023 to 2024 in 2023 the first $111,000 that you make get gets taxed at 10% in 2024.

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2024 tax brackets federal

It’s now increased to $1,600 which is good you and I we want it to increase because if that number is bigger that means more of our income will be taxed at a lower tax rate all the tax brackets expanded by 5.4% and it’s the same concept we want more of our money to be taxed at the lower rates.

We want more of our money to be taxed at the 10% rates we want more of our money to be tax tax at the 12% rate and I just bwant to point this out to you so look at look at how crazy this is look at how quickly the tax rates escalate.

tax brackets

When you start making $47,500 tax brackets so do you realize how quickly that escalates 22% for federal income taxes alone that is a big chunk of anyone’s income that’s not even including Social Security taxes Medicare taxes state income taxes.

When you’re making $47,000 a year you I mean you don’t have the money to spare 22% of your income for federal income taxes not to mention I we’re not even talking about sales taxes gasoline taxes property taxes you name it.

2024 federal income tax brackets

Now moving along it’s very important for me to tell you this because I want you to be aware of this I want I want you to know what the government is doing the government is short changing us every single year and that is not my opinion.

This is cold hard facts I’m going to tell you I’m going to give you examples so every single year the IRS and the government they nickel and dime us and it adds up and that’s just an expression because it costs us much more than nickels or dimes it cost.

One of us hundreds of dollars if not thousands of dollars every single year okay so these tax brackets the IRS adjusts them for inflation, How are tax brackets calculated  in 2024 | New tax brackets for 2024 so that’s good but that’s the least that they can do but I want to bring to your attention.

That they do not adjust for inflation the other very important things that cost us money and that’s how they’re getting us so for example Social Security recipients okay so this is so important because there’s over 60 million Social Security recipients in the United States of America.

federal income tax brackets for 2024 tax year

This is a brilliant way for the government to scam over 60 million people and that’s a lot of money originally Social Security benefits were tax-free but in the early 1980s Social Security was going insolvent so in 1983.

The government decided to start taxing Social Security benefits to prevent insolvency so the government decided that if you’re single and your total income is less than $25,000 a year then your Social Security benefits.

  • Will remain tax-free if you’re married the income threshold they set it to $32,000 a year for total income and I want you to keep in mind that the benefits that you receive count towards those thresholds a $225,000 $32,000 threshold okay so back then in 1983.
  • $25,000 was a lot of money and the majority of Social Security recipients back then made less than $25,000 a year in retirements so their social security benefits remained tax-free but that $225,000 threshold it never got adjusted for inflation.
  • More than 40 years later it’s still $25,000 that’s the threshold if you have more than $25,000 a total income your Social Security benefits start to get taxed every year as inflation persists more and more Social Security recipients are paying taxes.

IRS Releases NEW Inflation Tax Brackets

Their benefits so how screwed up is that so that is just one example I’ll give you more examples if you lose money in the stock market you can take a tax deduction of $3,000 so this $3,000 limits it does not get adjusted for inflation.

So that doesn’t make any sense they should increase the allowable tax deduction well from 3,000 to what at least 3,150 3,300 $4,000 right over time but of course I mean it’s Common Sense the IRS they don’t want to do that don’t want to increase tax.

Deductions because if they did Bigger tax deductions means less tax revenue for the IRS for the governments but is that fair the tax code in entirety should be adjusted for inflation should I not okay how about.

The itemized tax deductions for state and local taxes salt deductions that’s an example it’s capped at $10,000 so $10,000 a year it’s not adjusted for inflation and a lot of people the combination of state income taxes paid locality taxes paid property.

Federal Tax Brackets and Rates [2023 + 2024]

tax brackets

Taxes paid the combination of those those easily exceeds $10,000 but they cap it to minimize or to reduce your tax deduction if they adjusted this for inflation then millions of Americans would save money on their income taxes.

How about the net investment income tax so this does not get adjusted for inflation that means that more Americans are going to end up paying the extra 3.8% tax on money that you make from dividends from interest income.

  • Capital gain so that is not fair so I want you to know that the government is trying to be sneaky but I mean they’re not fooling me and I want you to know so I’m not exaggerating I’m not sensationalizing.
  • The situation I just gave you undeniable facts I just named explicit examples that apply to you to me to millions of Americans so we are being cheated I mean I don’t know if that’s is that is that my opinion or is is that a fact so these new IRS inflation adjusted tax brackets okay so the IRS.
  • They adjusted them upwards so thanks but it’s not good enough so what about the rest the government I mean they Short change this again yet again I what’s new right.

Listen I don’t want you to think that I’m being greedy I’m just saying that well from my perspective what they’re doing what the IRS is doing it’s it simply doesn’t make any sense.

How is this Fair how do you adjust the tax brackets but you don’t adjust the rest of the tax code so how does that make any sense how is that fair that’s just the way I see it not to mention the elephant in the room that the true the true rate of inflation.

Most likely higher than 5.4% we’ve we’ve gone over this thuroughly before and what kind of wacky formulas are these Brilliance government mathematicians using so next year you have the tax brackets they’re getting adjusted by 5.4% right.

2024 federal tax brackets chart

Next year Social Security recipients they’re getting a cost of living adjustment of 3.2% and meanwhile home prices they go up 30 to 40% since the pandemic.

I want to end with these updated figures for 2024 standard reduction is getting adjusted for inflation by 5.4% tax-free gifts is getting bumped up by $1,000 next year.

  •  $18,000 401K max contribution is going up by
  •  $500 2024 the limit is going to be
  • $23,000 a year IRA max contribution 2024
  • $7,000 the 401 k ketchup that’s
  • $7,500 the IRA ketchup it’s 1,000 so

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