The 2024 filing season is fast approaching. Soon you will be collecting documents again and making appointments with your trusted tax preparers (hoping it’s us this time). Tax codes do change from time to time. It’s important that taxpayers like you and me keep up with the trend.
Here are the tax updates IRS released:
2024 New Standard Deductions
Standard Deductions for Married Filing Jointly increased to $29,200; for Single and Married Filing Separately increased to $14,600; for Head of Household increased to $21,900.
2024 New Marginal Rates
The top rate remains at 37% for incomes over $609,350 ($731,200 for married couples filing jointly). The next lower rates are the ones adjusted.
- 35% for incomes over $243,725 ($487,450 for married couples filing jointly)
- 32% for incomes over $191,950 ($383,900 for married couples filing jointly)
- 24% for incomes over $100,525 ($201,050 for married couples filing jointly)
- 22% for incomes over $47,150 ($94,300 for married couples filing jointly)
- 12% for incomes over $11,600 ($23,200 for married couples filing jointly)
The lowest rate is not affected; it’s still at 10% for incomes over $11,600 or less ($23,200 for married couples filing jointly).
2024 New AMT Exemption Amount
AMT means Alternate Minimum Tax. This tax is imposed to put limit on the minimum amount higher income taxpayers pay.
The exemption for 2024 is $85,700 and begins to phase out at $609,350 ($133,300 for married couples filing jointly and begins to phase out at $1,218,700). This means that if your income is below $85,700 it won’t trigger AMT computation, you will be paying the regular tax instead.
2024 New Maximum Earned Income Credit Amount
Earned Income Credit Amount varies depending on your income, tax status and number of children. But the maximum for 2024 is set at $7,830, meaning this is the most one can get out of this credit with 3 or more kids.
2024 New Qualified Transportation Fringe Benefits
This includes limitation for qualified parking. It is now raised to $315.
2024 New Health Flexible Spending Account Limit
This is for employees who contributed to a Health Flexible Spending Arrangement, the dollar limit is now $3,200. If you have cafeteria plan with your employer that allows the unused amount to carryover, the maximum carryover amount is $640.
2024 New Medical Savings Account limit
If you have Medical Savings account that covers only yourself, the plan must have an annual deductible that is not less than $2,800 but not more than $4,150. The maximum out-of-pocket expense amount is $5,550.
For Medical Savings account that also covers the family, annual deductible is not less than $5,550 but not more than $8,350. The the out-of-pocket expense limit is $10,200.
Other Updates
- The foreign earned income exclusion is now at $126,500
- Estates of decedents who died during 2024 have a basic exclusion amount of $13,610,000
- The annual exclusion for gifts increases to $18,000 for calendar year 2024
- The maximum credit allowed for adoptions for tax year 2024 is the amount of qualified adoption expenses up to $16,810
All these updates apply to 2024 tax year that is going to be filed in 2025.
Source: https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2024