The IRS announced Thursday annual inflation adjustments for over 60 tax provisions in tax year 2024, including increases in the standard deduction for married couples and single individuals.
These tax year 2024 adjustments generally apply to tax returns that will be filed in 2025. Included are the tax rate schedules and other tax changes. Rev. Proc. 2023-24 provides details about these annual adjustments.
The standard deduction for married couples filing jointly for tax year 2024 increases to $29,200, up $1,500 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $14,600 for 2024, up $750. For heads of household, the standard deduction will be $21,900 for tax year 2024, up $1,100 from the amount for tax year 2023.
The tax items for tax year 2024 of greatest interest to most taxpayers include the following dollar amounts:
Income rate brackets
For tax year 2024, the top tax rate remains 37% for individual single taxpayers with incomes greater than $609,350 ($731,200 for married couples filing jointly).
The other tax brackets are:
- 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); and
- 10% for incomes of single individuals with incomes of $11,600 or less ($23,200 for married couples filing jointly).
Other adjustments
The IRS said that the alternative minimum tax exemption amount for tax year 2024 is $85,700 and begins to phase out at $609,350 ($133,300 for married couples filing jointly for whom the exemption begins to phase out at $1,218,700). For comparison, the 2023 exemption amount was $81,300 and began to phase out at $578,150 ($126,500 for married couples filing jointly for whom the exemption began to phase out at $1,156,300).
The maximum earned income tax credit amount will be $7,830 for qualifying taxpayers who have three or more qualifying children, up from $7,430 for tax year 2023. The revenue procedure contains a table providing maximum EITC amount for other categories, income thresholds and phase-outs.
The monthly limitation for the qualified transportation fringe benefit and the monthly limitation for qualified parking increases to $315, up $15 from the 2023 limit.
The dollar limitation for employee salary reductions for contributions to health flexible spending arrangements increases to $3,200. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount is $640, up $30 from taxable years beginning in 2023.
For participants who have self-only coverage in a medical savings account, the plan must have an annual deductible that is not less than $2,800, up $150 from tax year 2023, but not more than $4,150, up $200 from tax year 2023. For self-only coverage, the maximum out-of-pocket expense amount is $5,550, up $250 from 2023. For family coverage, the annual deductible is not less than $5,550, up $250 from tax year 2023; however, the deductible cannot be more than $8,350, up $450 from the limit for tax year 2023. For family coverage, the out-of-pocket expense limit is $10,200, up $550 from tax year 2023.
The foreign earned income exclusion is $126,500, increased from $120,000 for tax year 2023.
Estates of decedents who die during 2024 have a basic exclusion amount of $13,610,000, increased from $12,920,000 for estates of decedents who died in 2023.
The annual exclusion for gifts increases to $18,000 for calendar year 2024, increased from $17,000 for calendar year 2023.
The maximum credit allowed for adoptions for tax year 2024 is the amount of qualified adoption expenses up to $16,810, up from $15,950 for 2023.
New in 2024
Starting in calendar year 2023, the IRS said, the Inflation Reduction Act reinstates the Hazardous Substance Superfund financing rate for crude oil received at U.S. refineries and petroleum products that entered the United States for consumption, use, or warehousing. The tax rate is the sum of the Hazardous Substance Superfund rate and the Oil Spill Liability Trust Fund financing rate. For calendar years beginning in 2024, the Hazardous Substance Superfund financing rate is adjusted for inflation. For calendar year 2024 crude oil or petroleum products entered after Dec. 31, 2016, will have a tax rate of 26 cents a barrel.
— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.
