The Internal Revenue Service (IRS) has announced a series of adjustments for the 2024 tax year. As we navigate these changes, it’s essential for taxpayers to understand their implications, especially for estate planning.
Tax Bracket Adjustments
For 2024, tax brackets have been adjusted. The top tax rate remains at 37% for single taxpayers earning over $609,350 and married couples filing jointly earning over $731,200. The other rates are adjusted as follows:
- 35% for incomes over $243,725 ($487,450 for joint filers)
- 32% for over $191,950 ($383,900 for joint)
- 24% for over $100,525 ($201,050 for joint)
- 22% for over $47,150 ($94,300 for joint)
- 12% for over $11,600 ($23,200 for joint)
- 10% for incomes of $11,600 or less for singles and $23,200 or less for joint filers.
Standard Deduction Increases
The standard deduction has risen significantly. For married couples filing jointly, it’s now $29,200, up by $1,500. For single taxpayers and married individuals filing separately, it’s $14,600, increasing by $750. Heads of households will see a standard deduction of $21,900, up by $1,100.
Alternative Minimum Tax (AMT)
The AMT exemption for 2024 is $85,700, phasing out at $609,350 ($133,300 for married couples filing jointly, phasing out at $1,218,700).
Earned Income Tax Credit (EITC)
The maximum EITC for 2024 is $7,830 for those with three or more qualifying children. This is an increase from 2023’s $7,430.
Fringe Benefits and FSA Adjustments
The limit for qualified transportation fringe benefits and parking increases to $315 per month. Health Flexible Spending Arrangements (FSA) contributions have been raised to $3,200, with a carryover maximum of $640.
Medical Savings Account (MSA)
For MSAs, the annual deductible for self-only coverage ranges from $2,800 to $4,150, and for family coverage, it’s between $5,550 and $8,350. Out-of-pocket limits are also adjusted accordingly.
Foreign Earned Income Exclusion
The foreign earned income exclusion for 2024 is $126,500, an increase from 2023’s $120,000.
Estate and Gift Tax Changes
Estates of individuals who die in 2024 have a basic exclusion amount of $13,610,000. The annual gift tax exclusion increases to $18,000. Additionally, the maximum credit for adoptions is now $16,810.
Unchanged Tax Provisions
Some items remain unchanged due to legislative stipulations. The personal exemption remains at 0, and there is no limitation on itemized deductions. The Lifetime Learning Credit phase-out remains unadjusted for incomes exceeding $80,000 ($160,000 for joint returns).
These changes reflect the ongoing adjustments in response to economic conditions. Understanding these updates is crucial for effective tax planning and estate management. Start planning early to ensure you’re well-prepared for the 2024 tax year.
Our expertise in estate planning can help you navigate these updates smoothly. For personalized advice and assistance in adapting to these changes, schedule a consultation today.
