Annual Inflation Adjustments for 2024

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The IRS announced annual inflation adjustments for over 60 tax provisions for the tax year 2024, as well as inflation adjustments to contribution limits to certain retirement accounts and savings plans. Here are some key highlights:

NOTE: These adjustments apply to tax returns filed in 2025, not the upcoming tax season.

 

Standard Deduction Adjustments:

One significant change is in the standard deduction amounts for tax year 2024. For married couples filing jointly, the standard deduction increases to $29,200, up $1,500 from the previous year. Single taxpayers and married individuals filing separately will see a standard deduction of $14,600 for 2024, up $750. Heads of household will have a standard deduction of $21,900, up $1,100 from the previous year.

 

Income Tax Rate Brackets:

Now, let’s move on to income tax rate brackets for 2024. The top tax rate remains at 37% for individual single taxpayers with incomes over $609,350 and for married couples filing jointly with incomes over $731,200. The detailed tax brackets are outlined as follows:

  • 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).

 

Alternative Minimum Tax and Earned Income Tax Credit:

The alternative minimum tax exemption amount for 2024 is $85,700, with a phase-out starting at $609,350 for individuals and $1,218,700 for married couples filing jointly. For comparison, the exemption amount was $81,300 in 2023.

Shifting focus to the Earned Income Tax Credit, the maximum amount increases to $7,830 for 2024, up from $7,430 in 2023.

 

Inflation Adjustments for Retirement and Savings Accounts:

Turning our attention to retirement accounts, health savings accounts (HSAs), and flexible spending accounts (FSAs), the IRS has implemented significant changes effective January 2024. Be sure to look over your contributions at the start of the new year to ensure that you are on track to meet your goals.

 

Sec. 401(k), Sec. 403(b), most Sec. 457 plans, and the federal government’s Thrift Savings Plan:
  • Contribution limit increases to $23,000 in 2024 from $22,500 in 2023
  • Catch-up contribution limit remains at $7,500 for employees aged 50 and above, allowing a maximum contribution of $30,500

 

Traditional and Roth IRAs:
  • Annual contribution cap raised to $7,000 for 2024
  • IRA catch-up contribution limit remains at $1,000 for individuals aged 50 and older

 

SIMPLE retirement plans:
  • Contribution limit raised to $16,000 in 2024 from $15,500
  • Catch-up contribution limit for employees aged 50 and above remains at $3,500

 

Health Savings Accounts (HSAs):
  • Individual contribution limit: $4,150 for 2024
  • Family contribution limit: $8,300 for 2024
  • Individuals aged 55 and older can contribute an extra $1,000 to their HSAs

 

Flexible Spending Accounts (FSAs):
  • Contribution limit through payroll deductions: $3,200 for the 2024 plan year
  • Carryover allowance for unused health FSA amounts (if allowed by your company’s plan): Up to $640 in 2024, a $30 increase from the previous year

 

Conclusion:

In conclusion, these adjustments set the stage for financial planning in the upcoming year. From tax brackets to retirement account contributions, staying informed is key to maximizing your financial potential.

About the author, Amanda Hendren

Amanda Hendren is a seasoned professional with over 10 years of expertise in bookkeeping, Human Resources, and payroll management. As the CEO of Accountable Numbers, she leads a team of dedicated professionals in providing comprehensive financial services to businesses of all sizes. She holds a Bachelor’s degree in Accounting and a Master’s degree in Business Administration.

Amanda's passion for numbers and meticulous attention to detail have been instrumental in helping her clients maintain accurate and organized financial records. Her extensive knowledge and practical experience in accounting enable her to deliver strategic financial guidance that helps businesses optimize their operations and achieve their financial goals.

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