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While this is lower than the 2023 tax rate change, “it's still a pretty significant increase,” said Roger Stie, a certified financial planner and managing director of wealth planning at First Foundation Advisors in Irvine, California. Nett said.
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Experts say that if your salary is the same as last year, the tax bracket adjustment in 2024 could increase your salary slightly, depending on the amount of withholding.
Of course, rising costs over time can erode tax savings over time.
Annual inflation fell slightly in November, but many Americans are still feeling the pinch of soaring prices for homes, auto insurance and other everyday expenses.
“You always want to keep in mind how your income is changing, because it's complicated,” said Stinnett, who is also a certified public accountant.
Your federal income tax bracket tells you how much you should pay on each portion of your “taxable income,” which is calculated by subtracting the greater of your standard deduction or itemized deductions from your adjusted gross income.
In 2024, the standard deduction will also increase to reflect inflation, increasing from $13,850 in 2023 to $14,600 for single filers. Married couples filing jointly could potentially claim between $27,700 and $29,200. This change may reduce taxable income for some filers.
Federal and state payroll withholdings affect the taxes you pay throughout the year. If you overpay, you can expect a refund, and if you underpay, you can expect a tax bill.
Even if your salary increases in 2024, “new tax changes could still place you in a lower or higher tier,” says Mariner Wealth Advisors in Greenville, South Carolina. Director CFP Ashton Lawrence warns.
It's important to stay aware of tax laws and life changes that may affect your situation and adjust your paycheck withholding amounts. Form W-4 Talk to your employer if necessary, he said.
Life changes that can affect your taxes include marriage, divorce, birth or adoption of a child, retirement, buying a home, filing for bankruptcy, etc. According to the I.R.S..
One “easy check” could be last year's tax return, Stinnett said. If you get a large refund or owe a large balance, it may be a sign that it's time to review your withholdings.
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