Annual Inflation Adjustments

2024 Annual Inflation Adjustments: What You Need to Know

As a women-owned, local accounting firm serving the Mount Pleasant area, Perfect Balance Accounting is committed to keeping our clients informed about key tax changes. The IRS has recently announced the annual inflation adjustments for tax year 2024, impacting more than 60 tax provisions. These changes will affect tax rate schedules, deductions, and other key areas for taxpayers. Below are the most important updates for the upcoming tax season:

Key 2024 Tax Changes

  • Standard Deduction:
    • Married couples filing jointly: $29,200 (up by $1,500 from 2023).
    • Single taxpayers and married individuals filing separately: $14,600 (up by $750 from 2023).
    • Heads of households: $21,900 (up by $1,100 from 2023).
  • Marginal Tax Rates: The top tax rate remains at 37% for single individuals earning more than $609,350, or for married couples filing jointly with incomes over $731,200. Other tax brackets for 2024 include:
    • 35% for incomes over $243,725 ($487,450 for married couples filing jointly),
    • 32% for incomes over $191,950 ($383,900 for married couples),
    • 24% for incomes over $100,525 ($201,050 for married couples),
    • 22% for incomes over $47,150 ($94,300 for married couples),
    • 12% for incomes over $11,600 ($23,200 for married couples). The lowest rate of 10% applies to single individuals earning $11,600 or less ($23,200 for married couples).
  • Alternative Minimum Tax (AMT): The exemption for tax year 2024 is $85,700 and begins phasing out at $609,350 ($1,218,700 for married couples filing jointly). This is up from the 2023 exemption of $81,300.
  • Earned Income Tax Credit (EITC): The maximum EITC amount for 2024 is $7,830 for taxpayers with three or more qualifying children, an increase from $7,430 in 2023.
  • Qualified Transportation and Parking Benefits: The monthly limitation for qualified transportation fringe benefits, including parking, increases to $315, up by $15 from the 2023 limit.
  • Flexible Spending Accounts (FSA): The contribution limit for health flexible spending arrangements rises to $3,200 for 2024, with a maximum carryover amount of $640.
  • Medical Savings Accounts (MSA): For individuals with self-only coverage, the 2024 annual deductible must be between $2,800 and $4,150. The out-of-pocket expense limit rises to $5,550. For family coverage, the deductible ranges from $5,550 to $8,350, with a maximum out-of-pocket limit of $10,200.
  • Estate and Gift Tax Exclusions: The exclusion amount for estates of decedents who pass away in 2024 rises to $13,610,000, up from $12,920,000 in 2023. The annual gift tax exclusion increases to $18,000.
  • Foreign Earned Income Exclusion: For 2024, the exclusion increases to $126,500, up from $120,000 in 2023.

Updates Affecting Businesses

  • Superfund Excise Taxes: Beginning in 2024, the Inflation Reduction Act reinstates the Hazardous Substance Superfund tax on crude oil received at U.S. refineries and petroleum products entering the United States. The 2024 tax rate is $0.26 per barrel.

Need Help Navigating These Changes?

Tax laws and rates can significantly impact your financial planning. At Perfect Balance Accounting, we are dedicated to providing personalized tax services tailored to your unique needs. Whether you are an individual or a small business in the Mount Pleasant area, our team is here to help you make sense of the latest tax changes and maximize your deductions.

Contact us today to schedule a consultation and let us take the stress out of tax season!

Sources:

  • IRS Newsroom. “IRS Provides Tax Inflation Adjustments for Tax Year 2024.” Internal Revenue Service, Nov. 9, 2023. IR-2023-208