For Some Taxpayers, There’s Good News for 2024

For Some Taxpayers, There’s Good News for 2024

December 19, 2023

This is an updated version of an article that was originally published in November, 2022.

Even the Internal Revenue Service isn’t immune to the effects of inflation. In response to rising prices, the IRS is adjusting many income thresholds upward for tax-year 2024. This may reduce what many taxpayers will owe to Uncle Sam.

Here are some of the highlights. 

Higher tax bracket limits

The ordinary income ranges for each federal tax bracket will rise, which may reduce tax bills for many Americans.

For example, if you’re married and filing jointly and your combined income of $191,000 put you in the 24% federal tax bracket in 2023, you’ll move “down” into the 22% tax bracket in 2024 if your income remains the same or doesn’t rise above $201,050

The two tables below compare the 2023 and 2024 federal tax bracket limits.


Higher standard deductions

If you’re unable to itemize deductions or your aggregated deductions don’t exceed the IRS standard deduction amount, you’ll still get some relief next year. In 2024, the standard deduction for married couples will rise to $29,200, up from $27,700 in 2023. For single taxpayers and married couples filing individually, the standard deduction will rise from $13,850 in 2023 to $14,600 in 2024.

Those over age 65 may claim an additional standard deduction of $1,550 if they're filing jointly or $1,950 for single filers.

More generous estate and gift tax exclusions

In 2024, people can give up to $18,000 per recipient without gift tax implications, up from $17,000 for gifts made in 2023.

The basic estate tax exclusion for those who die in 2024 will rise to $13,610,000, up from $12,920,000 in 2023.

Increased Alternative Minimum Tax exemptions

The Alternative Minimum Tax (AMT) exemption for married couples filing jointly will rise from $126,500 in 2023 to $133,000 in 2024. 

Higher out-of-pocket medical expenses for many health plan participants

Unfortunately, not all of this news is good. If you participate in a high-deductible health plan (HDHP) at work, you may have to pay more of your own money for certain medical expenses. That’s because the IRS is raising minimum deductibles and maximum out-of-pocket amounts.

In 2024, the HDHP minimum deduction will rise from $1,500 to $1,600 for single filers and from $3,000 to $3,200 for families. 

The annual HDHP maximum total out-of-pocket amounts for families will increase $1,100 to $16,100. Self-only subscriber limits will increase $550, to $8,050.

The silver lining in all of this is that Health Savings Account (HSA) participants will be able to make larger pre-tax contributions next year. HSA contribution limits for families will rise from $7,750 to $8,300. Self-only HSA participants’ contribution limits will rise from $3,850 to $4,150.

Weighing the impact of these changes

This is by no means an exhaustive list of IRS changes for 2024. For a complete list, visit the IRS web site.

Since these changes apply to the 2024 tax year, taxpayers won’t experience benefits in terms of lower tax bills or refunds until they file their 2024 tax returns in 2025.

Even still, you may want to speak with a tax professional to see if there is anything you should do to take advantage of these changes—or reduce their potential impact.

 

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This article was authored by Dan Flanagan and Jeffrey Briskin. Dan is a financial advisor and Partner located at Canby Financial Advisors, 161 Worcester Road, Framingham, MA 01701. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 508.598.1082 or dflanagan@canbyfinancial.com. Jeffrey Briskin is Director of Marketing at Canby Financial Advisors.

 

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