Now that we’ve made it to a new year, it’s natural to expect changes in the future. This is especially true for taxpayers across the United States who are gearing up for tax changes for 2024. From adjustments in income tax brackets to modifications in retirement contribution limits, there are several key updates to be aware of this tax season. You might be wondering what the new tax plan means for me. If so, we’ve got answers. Check out these IRS-sourced facts and insights about tax changes so you can be prepared and stay on top of your tax paying game.
Income Tax Brackets
Some good news here – the income tax brackets for 2024 have been adjusted to account for inflation. Taxpayers will now fall into one of seven brackets based on their taxable income, ranging from 10% to 37%. As you’re working on your tax returns, it’s important to note these brackets when calculating your tax liability for the year.
TABLE 1 – Section 1(j)(2)(A) – Married Individuals Filing Joint Returns and Surviving Spouses
Taxable Income | Tax Rate (%) | Tax Amount |
Not over $23,200 | 10 | 10% of the taxable income |
Over $23,200 but not over $94,300 | 12 | $2,320 plus 12% of excess |
Over $94,300 but not over $201,050 | 22 | $10,852 plus 22% of excess |
Over $201,050 but not over $383,900 | 24 | $34,337 plus 24% of excess |
Over $383,900 but not over $487,450 | 32 | $78,221 plus 32% of excess |
Over $487,450 but not over $731,200 | 35 | $111,357 plus 35% of excess |
Over $731,200 | 37 | $196,669.50 plus 37% of excess |
TABLE 2 – Section 1(j)(2)(B) – Heads of Households
Taxable Income | Tax Rate (%) | Tax Amount |
Not over $16,550 | 10 | 10% of the taxable income |
Over $16,550 but not over $63,100 | 12 | $1,655 plus 12% of excess |
Over $63,100 but not over $100,500 | 22 | $7,241 plus 22% of excess |
Over $100,500 but not over $191,950 | 24 | $15,469 plus 24% of excess |
Over $191,950 but not over $243,700 | 32 | $37,417 plus 32% of excess |
Over $243,700 but not over $609,350 | 35 | $53,977 plus 35% of excess |
Over $609,350 | 37 | $181,954.50 plus 37% of excess |
TABLE 3 – Section 1(j)(2)(C) – Unmarried Individuals (other than Surviving Spouses and Heads of Households)
Taxable Income | Tax Rate (%) | Tax Amount |
Not over $11,600 | 10 | 10% of the taxable income |
Over $11,600 but not over $47,150 | 12 | $1,160 plus 12% of excess |
Over $47,150 but not over $100,525 | 22 | $5,426 plus 22% of excess |
Over $100,525 but not over $191,950 | 24 | $17,168.50 plus 24% of excess |
Over $191,950 but not over $243,725 | 32 | $39,110.50 plus 32% of excess |
Over $243,725 but not over $609,350 | 35 | $55,678.50 plus 35% of excess |
Over $609,350 | 37 | $183,647.25 plus 37% of excess |
TABLE 4 – Section 1(j)(2)(D) – Married Individuals Filing Separate Returns
Taxable Income | Tax Rate (%) | Tax Amount |
Not over $11,600 | 10 | 10% of the taxable income |
Over $11,600 but not over $47,150 | 12 | $1,160 plus 12% of excess |
Over $47,150 but not over $100,525 | 22 | $5,426 plus 22% of excess |
Over $100,525 but not over $191,950 | 24 | $17,168.50 plus 24% of excess |
Over $191,950 but not over $243,725 | 32 | $39,110.50 plus 32% of excess |
Over $243,725 but not over $365,600 | 35 | $55,678.50 plus 35% of excess |
Over $365,600 | 37 | $98,334.75 plus 37% of excess |
Standard Deduction
Here’s a breakdown of the standard deduction for various filing statuses, including their phase-out ranges and any tax changes for 2024:
Filing Status | 2023 Standard Deduction | 2024 Standard Deduction | Increase from 2023 |
Married Filing Jointly | $27,700 | $29,200 | $1,500 |
Single | $13,850 | $14,600 | $750 |
Married Filing Separately | $13,850 | $14,600 | $750 |
Head of Household | $20,800 | $21,900 | $1,100 |
Retirement Contribution Limits
Contribution limits for retirement accounts have seen some changes in 2024. Individuals can now contribute up to $20,500 to their 401(k) plans and an additional catch-up contribution of $6,500 for individuals 50 years of age or older. IRA contribution limits remain at $6,000, with a $1,000 catch-up contribution for people aged 50 years and older.
Gift Tax
For 2024, the annual gift tax exclusion remains unchanged, which is at $15,000 per recipient. This means individuals can give up to $15,000 to another person without triggering any gift tax implications.
Roth IRAs
For Roth IRAs, the income phase-out ranges for contributions have been adjusted slightly for inflation. People who file single with a modified adjusted gross income (MAGI) between $129,000 and $144,000 are eligible to make partial contributions to Roth IRAs. The same is true for married couples who file jointly with a MAGI between $204,000 and $214,000.
Saver’s Credit
The Saver’s Credit is designed to incentivize retirement savings for low-to-moderate-income individuals and remains in place for 2024. Eligible taxpayers can receive a credit of up to $1,000 for contributions to retirement accounts.
Will My Refund Be Bigger in 2024?
Great question, and the answer is different for every taxpayer. Whether or not your refund will be bigger in 2024 depends on various factors, including changes in your income, deductions, and credits. While adjustments in tax brackets and deductions may affect the amount of taxes you owe, other factors, such as changes in your financial situation and tax planning strategies, will ultimately determine the size of your refund.
Federal Tax Changes
Federal tax changes for 2024 reflect changes to factor in inflation and adjustments in economic conditions. These changes aim to ensure the tax system remains fair and equitable for all taxpayers while providing incentives for retirement savings and other financial behaviors promoting economic stability. It’s essential for taxpayers to stay informed about these changes and consult with tax professionals to maximize their tax savings and compliance with the latest regulations.
Tax Planning Tips
- Contribute to Retirement Accounts: Maximize contributions to retirement accounts (like 401(k)s or IRAs) to lower taxable income. You can also benefit from withdrawals that are tax-free or have tax-deferred growth, such as with Roth accounts.
- Take Advantage of Tax Credits and Deductions: Utilize deductions and tax credits. Such deductions and credits include: Earned Income Tax Credit, Child Tax Credit, mortgage interest deduction, and charitable donations to reduce taxable income or tax liability.
- Harvest Investment Losses: Offset capital gains by selling investments with losses, allowing you to minimize capital gains taxes and potentially save on overall tax liability.
- Plan Charitable Contributions: Donate appreciated assets like stocks or real estate to charity. This can help you sidestep capital gains taxes on the appreciated items. It can also allow you to receive a charitable deduction for the fair market value, offering both tax benefits and philanthropic impact.
- Stay Informed and Seek Professional Advice: Keep updated on tax laws and tax changes for 2024. Think about consulting with a seasoned tax professional. These experts can help you establish a personalized tax strategy that is curated specifically to your financial goals and circumstances.
Frequently Asked Questions About Taxes in 2024
As mentioned earlier, the current income tax brackets can shift according to factors such as your filing status and total taxable income. It’s essential to consult the latest IRS publications or use online tax calculators to determine the applicable tax rates for your specific situation.
Tax laws can change annually, introducing new tax credits or deductions or modifying existing ones. Stay updated by checking the IRS website or consulting with a tax professional to learn about new tax savings opportunities.
The deadline for filing taxes can vary due to weekends, holidays, or extensions granted by the IRS. Typically, the standard deadline is April 15th, but verifying the exact deadline for the current tax year is essential.
Recent tax law changes can have various impacts on taxpayers, including changes to deductions, credits, tax rates, and retirement account rules. Consult with a tax professional to understand how these changes specifically affect your financial situation in the light of tax changes for 2024.
The documentation required for filing taxes typically includes W-2 forms, 1099 forms, receipts for deductible expenses, investment statements, and other relevant financial records. It’s a good idea to keep these documents organized to streamline the tax filing process.
You can minimize your tax liability by taking advantage of available tax credits, deductions, retirement contributions, and strategic tax planning strategies. Consider consulting with a tax professional to develop a personalized tax strategy tailored to your financial goals.
Avoid this at all costs, because not paying your taxes by the deadline can result in potentially severe fees, penalties, interest charges, and other consequences. Penalties differ according to the amount owed and the length of the delay. It’s essential to comply with tax deadlines to avoid unnecessary fees and penalties.
Certain life events, such as buying a home, getting married, having a child, or paying for education expenses, can make taxpayers eligible for tax breaks or credits. Research available tax benefits related to these events to maximize your tax savings.
To protect yourself from tax scams or identity theft, be vigilant about safeguarding your personal and financial information. Be wary of unsolicited communication claiming to be from the IRS. Never give out private or sensitive information (such as passwords or bank account information) unless you’ve verified the legitimacy of the request. Stay informed about common tax scams and report any suspicious activity to the appropriate authorities.