As we step into the new tax year, the Internal Revenue Service (IRS) has unveiled a series of modifications that will influence various aspects of your tax planning. From standard deductions to marginal tax rates and an array of credits, here’s a breakdown of the key changes for 2024:
- Standard Deduction Increases:
- Married couples filing jointly: $29,200 (a $1,500 uptick from 2023)
- Single taxpayers and married individuals filing separately: $14,600 (an increase of $750 from 2023)
- Heads of households: $21,900 (a boost of $1,100 from 2023)
- Marginal Tax Rates:
- The top tax rate maintains its position at 37% for individual single taxpayers earning over $609,350 ($731,200 for married couples filing jointly).
- Alternative Minimum Tax (AMT) Exemption:
- For tax year 2024, the AMT exemption is set at $85,700, with a phase-out beginning at $609,350 ($133,300 for married couples filing jointly, with a phase-out starting at $1,218,700).
- Earned Income Tax Credit (EITC):
- The maximum EITC amount sees an increase to $7,830 for qualifying taxpayers with three or more qualifying children.
- Qualified Transportation Fringe Benefit:
- The monthly limitation experiences a rise to $315 for tax year 2024.
- Health Flexible Spending Arrangements (FSA):
- Employee salary reduction limits elevate to $3,200 for tax year 2024.
- Medical Savings Accounts (MSA):
- Deductibles for self-only coverage see an adjustment from $2,800 to $4,150, while for family coverage, they range from $5,550 to $8,350.
- Foreign Earned Income Exclusion:
- A notable increase brings the exclusion to $126,500 for tax year 2024.
- Estate Tax Exemption:
- The basic exclusion amount witnesses an uptick to $13,610,000 for estates of decedents who pass away during 2024.
- Annual Gift Exclusion: – A significant increase sets the exclusion at $18,000 for calendar year 2024.
- Adoption Credit: – The maximum allowable credit experiences an enhancement, reaching $16,810 for tax year 2024.
Items Unaffected by Indexing:
- The personal exemption remains at 0.
- There is no limitation on itemized deductions.
- The modified adjusted gross income amount used to determine the reduction in the Lifetime Learning Credit remains unadjusted for inflation.
These adjustments underscore the dynamic nature of tax regulations. Staying informed about these changes ensures that you can navigate the tax landscape effectively, making informed decisions and optimizing your financial strategies. You can always contact our experts to ensure maximum benefits this tax season.