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The IRS has released its annual inflation adjustments for 2024 for over 60 tax provisions, including tax rate schedules, deductions, credits, and more. These updates, outlined in Revenue Procedure 2023-34, are essential for taxpayers as they prepare for filing their 2024 income tax returns in 2025. Here’s a summary of the most notable changes:
Standard Deductions for 2024
The standard deduction has increased, offering potential tax savings for many taxpayers:
- Married couples filing jointly: $29,200 (up $1,500 from 2023)
- Single taxpayers and married individuals filing separately: $14,600 (up $750 from 2023)
- Heads of households: $21,900 (up $1,100 from 2023)
Updated Marginal Tax Rates
The top marginal tax rate remains 37% for single taxpayers with incomes over $609,350 and married couples filing jointly with incomes over $731,200. Other tax brackets are as follows:
- 35%: Single incomes over $243,725; married incomes over $487,450
- 32%: Single incomes over $191,950; married incomes over $383,900
- 24%: Single incomes over $100,525; married incomes over $201,050
- 22%: Single incomes over $47,150; married incomes over $94,300
- 12%: Single incomes over $11,600; married incomes over $23,200
- 10%: Incomes below $11,600 (single) or $23,200 (married)
Additional Key Updates for 2024
Earned Income Tax Credit (EITC)
The maximum EITC for taxpayers with three or more qualifying children increases to $7,830, up from $7,430 in 2023.
Flexible Spending Arrangements (FSAs)
- Employee salary reductions for FSAs increase to $3,200 (up $200).
- Maximum carryover for unused amounts rises to $640 (up $30).
Medical Savings Accounts (MSAs)
- Self-only coverage: Annual deductible must be between $2,800 and $4,150, with a maximum out-of-pocket expense of $5,550.
- Family coverage: Annual deductible must be between $5,550 and $8,350, with a maximum out-of-pocket expense of $10,200.
Gift and Estate Tax Adjustments
- Annual gift exclusion: Increases to $18,000 (up from $17,000).
- Estate tax basic exclusion amount: Rises to $13,610,000 (up from $12,920,000).
Foreign Earned Income Exclusion
For taxpayers working abroad, the exclusion increases to $126,500, up from $120,000 in 2023.
What Remains Unchanged
Certain provisions are unaffected by inflation adjustments:
- Personal exemption: Remains at $0 (unchanged since the Tax Cuts and Jobs Act).
- Itemized deduction limitation: No limitations, as eliminated by the Tax Cuts and Jobs Act.
- Lifetime Learning Credit threshold: Phase-out starts at $80,000 modified adjusted gross income ($160,000 for joint filers).
Important Notes for Businesses
The reinstatement of the Hazardous Substance Superfund financing rate for crude oil and petroleum products marks a new development under the Inflation Reduction Act. For 2024, the tax rate is $0.26 per barrel, adjusted for inflation.
Stay Prepared for Tax Year 2024
These changes highlight the importance of staying informed and proactive with tax planning. At Anderson, Adkins & Company, we’re here to help you navigate these updates and optimize your tax strategy for the year ahead.
Questions? Contact us today at info@augustacpas.com or 706-288-2000 to schedule a consultation.
Disclaimer: This blog is for informational purposes only and should not be considered as legal or tax advice. Please consult with a tax professional for guidance specific to your situation.
