2024 IRS Income Tax Brackets And Phaseouts

The IRS publishes new federal income tax brackets each year, along with the income-phaseouts for tax deductions and tax credits. This includes the education tax benefits, such as the American Opportunity Tax Credit (AOTC), Lifetime Learning Tax Credit (LLTC) and Student Loan Interest Deduction. 

The figures are adjusted annually for inflation, but rounded to a multiple of $25, $50, $100, $500 or $1,000, as specified by Congress. Some income phaseouts are not automatically adjusted. 

The updates are typically published as one or more IRS Revenue Procedures in late October or early November. This year’s updates were published in IRS Notice 23-34 and IRS Notice 23-75.

The tax brackets and income phaseouts will be updated in IRS Publication 17, Your Federal Income Tax, and IRS Publication 970, Tax Benefits for Education, sometime in 2024.  

2024 Tax Brackets

Federal income tax is calculated based on seven tax brackets, which depend on the taxpayer’s income and tax filing status. The income within each federal tax bracket is taxed at the specified rate. Any excess income is taxed at the next bracket.

For example, a single taxpayer earning $35,000 a year in taxable income will span two tax brackets:

• The income up to $11,600 will be taxed at 10%, yielding $1,160
• The excess income ($35,000 minus $11,600, or $23,400) will be taxed at 12%, yielding $2,808.

The two figures are then combined to yield a total income tax of $3,968. The highest applicable tax bracket, 12%, is called the marginal tax rate. That means every additional dollar of income is taxed at the 12% rate until the next tax bracket is reached.

This table shows the seven tax brackets for each tax filing status. 

Estates and trusts have their own separate set of four tax brackets, which increase more rapidly than the tax brackets for taxpayers.

Before calculating the taxes on income, however, certain deductions may be subtracted from income. There are two types of deductions, itemized deductions and the standard deduction. Most taxpayers claim the standard deduction, which are shown in this table.

If a taxpayer itemizes deductions, they may be subject to the Alternative Minimum Tax (AMT), which disallows certain itemized deductions if the itemized deductions reduce the taxable income too much. There is an exemption that prevents the AMT from being applied to low and middle-income taxpayers. 

The AMT exemption is $85,700 for single filers, $133,300 for married filing jointly, $66,650 for married filing separately and $29,900 for estates and trusts.

2024 Capital Gains Taxes

When you sell a stock or other investments, you realize a capital gain or capital loss based on the different between the selling price and the purchase price (cost basis). 

If you held the assets for less than a year, the capital gains are called short-term capital gains and are taxed at the same tax rate as ordinary income.

If you held the assets for more than a year, the capital gains are called long-term capital gains and are taxed according to the rates in this table.

Capital losses from selling one asset can offset capital gains in other assets. This is called tax loss harvesting. Net capital losses of up to $3,000 can offset ordinary income.

This table shows the income limits for each capital gains tax rate. Capital gains above the cap on the 15% capital gains tax rate are taxed at the 20% rate.

Tax Rates And Tax Credits For Children

Some of a child’s unearned income is taxed at a different rate than their parents, depending on the child’s age. This is called the Kiddie Tax.

• The first $1,300 of a child’s income is tax-free.
• The next $1,300 of a child’s income, up to $2,600 total, is taxed at the child’s tax rate.
• Amounts over $2,600 are taxed at the parent’s marginal tax rate. 

These rates apply to children under age 19 and dependent full-time students under age 24.

A child’s parent may be eligible to claim the Child Tax Credit and Earned Income Tax Credit.

The Child Tax Credit provides a tax credit worth up to $2,000 per qualifying dependent under age 17. The tax credit is reduced for taxpayers with a modified adjusted gross income of $200,000 (single, head of household and married filing separately) or $400,000 (married filing jointly). 

The Child Tax Credit is not refundable. However, a taxpayer who doesn’t have a tax liability to offset may be able to qualify for the Additional Child Tax Credit of up to $1,700, which is refundable. 

The Earned Income Tax Credit (EITC) is a refundable tax credit based on the parent’s earned income and the number of children. The EITC is available to parents with low or moderate income. To be eligible, the parents cannot have aggregate investment income of $11,600 or more. The maximum tax credit is $632 for no children, $4,213 for one child, $6,960 for two children and $7,830 for three or more children. 

Parents may also be eligible for the Child and Dependent Care Credit if they paid for childcare while working or looking for work. The amount of the tax credit depends on the parents’ income and a percentage of the childcare expenses. 

Income Phaseouts For Education Benefits

There are several education tax benefits which are intended to help families pay for college costs. Each of these tax benefits has an income phaseout that caps the income at which the tax benefit can be claimed. 

The income phaseouts for the American Opportunity Tax Credit,  Lifetime Learning Tax Credit and Coverdell Education Savings Accounts are not adjusted for inflation. 

The income phaseouts are shown in this table.

An older education tax break, the Tuition and Fees Deduction, has been permanently repealed.

Income Exclusions

The giver of a gift may be subject to gift taxes, unless certain exclusions apply. There is an Annual Gift Tax Exclusion of $18,000 per giver per recipient. A married couple can give up to twice this amount without incurring gift taxes. If the gift exceeds this threshold, there is a Lifetime Estate and Gift Tax Exclusion of $13.61 million. 

In addition, contributions to a 529 college savings plan are eligible for five-year gift-tax averaging, called super-funding, which treats a lump sum contribution over the annual exclusion as occurring over a five-year period.

There is also a Foreign Income Exclusion of $126,500.

Retirement Plan Contribution Limits

Retirement plans have annual contribution limits that depend on age and income.

• Roth IRA. Taxpayers may contribute up to $7,000 to a Roth IRA. There is an additional $1,000 catch-up contribution limit for workers age 50 and older. Roth IRA contributions are also subject to an income phaseout: $146,000 to $161,000 (single and head of household), $230,000 to $240,000 (married filing jointly) and $0 to $10,000 (married filing separately).
• 401(k), 403(b) and 457 plans. Taxpayers can contribute up to $23,000 to a 401(k), 403(b) and 457 plans. There is an additional $7,500 catch-up contribution limit for workers age 50 and older. 
• SIMPLE Plans. The annual contribution limit for SIMPLE retirement plans is $16,000. There is an additional catch-up contribution limit of $3,500.

The income limit for the Saver’s Credit is $38,250 (single and married filing separately), $76,500 (married filing jointly) and $57,375 (head of household).