As we step into 2024, significant updates and changes in the U.S. tax code are set to impact taxpayers across the country. Staying informed about these updates is crucial for effective tax planning and ensuring compliance. Here’s a comprehensive overview of the key tax changes for 2024 that you need to be aware of:
1. Changes to Income Tax Brackets
The IRS has adjusted income tax brackets for 2024 to account for inflation. These adjustments affect the income ranges for each tax bracket, which could lead to changes in the amount of tax you owe. For example:
- 10% Bracket: Applies to income up to $11,000 for single filers and $22,000 for married couples filing jointly.
- 12% Bracket: Applies to income over $11,000 but not exceeding $44,725 for single filers and over $22,000 but not exceeding $89,450 for married couples.
- 22% Bracket: Applies to income over $44,725 but not exceeding $95,375 for single filers and over $89,450 but not exceeding $190,750 for married couples.
These adjustments mean that you might fall into a different tax bracket or owe less in taxes if your income has not increased significantly.
2. Standard Deduction Increases
The standard deduction has been increased for 2024:
- Single Filers: $14,000 (up from $13,850 in 2023)
- Married Couples Filing Jointly: $28,800 (up from $27,700 in 2023)
- Head of Household: $21,400 (up from $20,800 in 2023)
This increase in the standard deduction can reduce your taxable income and potentially lower your overall tax bill.
3. Adjustments to Retirement Contributions
For 2024, the IRS has increased the contribution limits for retirement accounts:
- 401(k) and 403(b) Plans: The contribution limit has been raised to $23,500 (up from $22,500 in 2023).
- IRA Contributions: The limit for contributions to a traditional or Roth IRA has increased to $7,500 (up from $6,500 in 2023). The catch-up contribution limit for individuals aged 50 and older is now $1,000, bringing the total to $8,500.
These changes allow you to save more for retirement and potentially benefit from greater tax-deferred growth.
4. Child Tax Credit Adjustments
The Child Tax Credit remains a crucial benefit for families. For 2024, the credit remains at $2,000 per qualifying child under the age of 17. However, the phase-out thresholds for the credit have been adjusted for inflation:
- Single Filers: The phase-out begins at $200,000.
- Married Couples Filing Jointly: The phase-out begins at $400,000.
These adjustments ensure that the credit remains a valuable benefit for families while reflecting changes in economic conditions.
5. Estate and Gift Tax Exemption Changes
The estate and gift tax exemption has been increased for 2024 to $13.4 million per individual (up from $12.9 million in 2023). This means you can transfer more wealth to heirs without incurring federal estate or gift taxes. For married couples, the combined exemption is $26.8 million.
6. Health Savings Account (HSA) Contribution Limits
For 2024, the contribution limits for Health Savings Accounts (HSAs) have increased:
- Self-Only Coverage: $4,150 (up from $4,100 in 2023).
- Family Coverage: $8,300 (up from $8,200 in 2023).
These higher limits allow you to save more for qualified medical expenses on a tax-advantaged basis.
7. Updates to the Alternative Minimum Tax (AMT)
The AMT exemption amounts for 2024 have been increased:
- Single Filers: $84,500 (up from $81,300 in 2023).
- Married Couples Filing Jointly: $138,500 (up from $126,500 in 2023).
These adjustments help reduce the number of taxpayers affected by the AMT and potentially lower your tax liability if you were previously impacted.
8. Changes in Business Tax Provisions
Several updates affect business owners, including:
- Bonus Depreciation: The percentage of bonus depreciation for qualified property has been reduced to 80% for 2024, down from 100% in previous years.
- Section 179 Expensing: The maximum deduction for Section 179 property has increased to $29,000 (up from $28,200 in 2023).
These changes impact how businesses account for their expenses and investments, potentially affecting their tax planning strategies.
Stay Informed and Plan Ahead
Understanding these updates is essential for effective tax planning. At Junior Tax, we’re committed to helping you navigate these changes and optimize your tax situation. If you have any questions or need assistance with your tax planning, don’t hesitate to reach out to our team of experts.
Contact Us Today
For personalized tax advice and assistance with navigating these 2024 updates, contact us at office@juniortax.net. Let us help you make the most of the new tax landscape.