Understanding the New 2024 IRS Tax Adjustments - What You Need to Know!

Inflation Adjustments Galore!

2024 is seeing a wave of adjustments due to inflation. This includes changes to tax brackets, standard deductions, and even how much you can contribute to health savings accounts.

Standard Deductions on the Rise

• For Singles and Married Individuals Filing Separately: The standard deduction is jumping to $14,600 (up by $750).
• Married Couples Filing Jointly: You’re looking at a $29,200 standard deduction, a $1,500 increase.
• Heads of Households: Your deduction will be $21,900, up by $1,100.

Marginal Tax Rates

The top tax rate remains at 37% for higher income brackets, but other rates have shifted slightly to adjust for inflation. Here’s a quick look at the rates:

• 35% for incomes over $243,725 (single) or $487,450 (joint)
• 32%, 24%, 22%, and 12% for progressively lower income ranges
• The lowest rate is 10% for incomes of $11,600 or less (single) or $23,200 or less (joint)

Alternative Minimum Tax (AMT)

The AMT exemption has increased to $85,700, with phase-outs starting at higher income levels compared to 2023.

Earned Income Tax Credit (EITC)

Great news for families! The maximum EITC for those with three or more qualifying children is now $7,830.

Other Notable Changes

• The limit for qualified transportation fringe benefits and parking has increased to $315 per month.
• Health Flexible Spending Arrangements see a bump to $3,200.
• Medical Savings Account changes include adjustments in deductibles and out-of-pocket limits.
• Foreign earned income exclusion is up to $126,500.
• Estate exclusions and gift allowances have also seen a rise.
• The adoption credit maximum is now $16,810.

Some Things Stay the Same

Interestingly, not everything is changing. The personal exemption remains at zero, and there’s no cap on itemized deductions. Plus, the Lifetime Learning Credit phase-out thresholds are unchanged.

Parting Thoughts

These changes, while technical, can have a big impact on your finances. It’s always good to stay informed and possibly consult a tax professional to understand how these changes affect your specific situation. 📞 Schedule a Discovery Call Today if you need more clarification on Taxes specific for your situation.