Each year, the IRS releases inflation adjusted numbers for several key figures that are critical in determining your tax liability.
The first one is your standard deduction.
Basically, it's the portion of your income that is considered TAX FREE that depends on the filing status you use. Check out the table below for the amounts for 2024. There are technically 5 filing statuses, but 4 are shown in the table because the Surviving Spouse is allowed to use the Married Filing Jointly amounts.
2. Next up, is your tax rate.
Once your taxable income is determined, you, your tax software or tax preparer will apply the applicable rates to determine your tax bill for the year. And.... surprise! Your tax rate/tables also depend on your filing status (so it's important to get that right.) So there is a different table for each of the five filing statuses and you can review them below.
If you quickly look at the single vs. head of household, the latter has a bigger band of income taxed at each of the applicable tax rates. This is an advantage of using this filing status vs. single, if you qualify.
The numbers in the married filing jointly chart allow double the amount of income for each tax bracket. This is one of the most advantageous filing statuses for this reason. If you compare to the married filing separately chart below, you will notice the tax rates are similar to those of the single filing status. So using this filing status erases the benefit of filing jointly, but might be necessary in many cases.
So without going too far into detail, I just wanted to provide some info regarding key figures that go into calculating your tax liability. If you have questions, feel free to drop a comment below or send me a message!
Until next time,
Monique
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