The steps you take throughout this year will influence your tax bill next year. That's why it’s never too early to start planning for next year’s tax season.
There are several changes to the tax code for 2024 that are likely to affect how much tax you’ll have to pay. Here are a few of them to keep in mind as you manage your finances throughout the year.
To review the tax changes for 2024, you can visit the IRS's page dedicated to them. We've gathered a few notable changes below for you to consider with your tax advisor.
Tax Changes Happening in 2024
In response to inflation, the IRS has adjusted marginal tax brackets and the standard deduction for 2024. As a result of the changes, many Americans will be able to keep more of their 2024 income.
Other big changes include increases to the allowed contribution amounts for tax-advantaged retirement savings accounts.
You might see a slight increase in your paychecks, depending on your withholding. This is because of adjusted tax brackets and a larger standard deduction, among other tax changes.
Here’s a detailed look at these adjustments:
Standard Deduction Changes for 2024
While you can use itemization to take deductions on your tax returns, the standard deductions provided by the IRS are popular for their simplicity. Standard deductions are set amounts by which taxpayers can lower their taxable income based on their filing status.
For tax year 2024, the standard deduction for married couples filing jointly rises to $29,200, an increase of $1,500 from 2023.
For single taxpayers, the standard deduction rose to $14,600, a $750 increase from the previous year.
Heads of households, or unmarried taxpayers who have dependents and pay for more the half of the expenses of a household, can take a standard deduction of $21,900 in 2024, an increase of $1,100 from 2023.
Here's a table that breaks down standard deduction changes between 2023 and 2024:
| Filing status | 2023 Standard Deductions | 2024 Standard Deductions |
| Single | $13,850.00 | $14,600.00 |
| Married, filing separately | $13,850.00 | $14,600.00 |
| Married, filing jointly | $27,700.00 | $29,200.00 |
| Head of household | $20,800.00 | $21,900.00 |
For example, in 2024, an individual taxpayer with an income of $50,000 can take the standard deduction and reduce their taxable income to $35,400.
Tax Bracket Changes in 2024
With new tax brackets in 2024, some taxpayers may find that their tax bill is lower than expected.
For example, if you earned $46,000 in 2023, you were in the 22% federal income tax bracket. But with the same $46,000 income in 2024, you’d be in a 12% tax bracket.
Here’s a look at the tax brackets for 2024:
| Tax Rate | Single Taxpayers | Married, Filing Jointly |
| 37% | Incomes greater than $609,350 | Incomes greater than $731,200 |
| 35% | Incomes greater than $243,725 | Incomes greater than $487,450 |
| 32% | Incomes greater than $191,950 | Incomes greater than $383,900 |
| 24% | Incomes greater than $100,525 | Incomes greater than $201,050 |
| 22% | Incomes greater than $47,150 | Incomes greater than $94,300 |
| 12% | Incomes greater than $11,600 | Incomes greater than $23,200 |
| 10% | Incomes of $11,600 or less | Incomes of $23,200 or less |
Retirement Plan Contribution Changes
In 2024, taxpayers can increase their contributions to tax-advantaged retirement savings plans. The contribution limit for employees who contribute to 401(k) and 403(b) plans increases to $23,000 annually, up from $22,500. Employees aged 50 and over can contribute an additional $7,500, for a total of $30,500.
The IRA contribution limit for 2024 is $7,000 for workers below the age of 50 and $8,000 for those over 50. This is an increase from 2023, when the limit was $6,500 and $7,500 for people over 50.
Tax Credits & Deductions
If you plan to itemize deductions rather than take the increased standard deduction described above, you may benefit from increased tax credits and deductions. Deductions can be varied and complicated, so looking at the IRS page about deductions and working with a tax professional can help you determine which options are right for you.
For example, the maximum tax credit for adoption expenses increased to $16,810 from $15,950.
Do You Qualify for the Earned Income Tax Credit?
Workers who earn a low to moderate income may be able to reduce their tax liability through the earned income tax credit. Those who qualify for this tax credit can use it to lower their tax bill and, in certain instances, increase their tax refund.
Here are the earned income tax credit requirements for 2024:
| Dependents | Maximum possible credit | Income limit for single, head of household or widowed filers | Income limit for married filing jointly filers |
| 0 | $632 | $18,591 | $25,511 |
| 1 | $4,213 | $49,084 | $56,004 |
| 2 | $6,960 | $55,768 | $62,688 |
| 3 or more | $7,830 | $59,899 | $66,819 |
In addition to meeting the income limit requirements above, IRS requirements for the earned income tax credit include:
- Investments in 2024 totaling $11,600 or less.
- No foreign earned income that required form 2555 or 2555-EZ in 2024.
- Filers must be at least age 25 and no older than 65 if filing for the credit without children or dependents.
There are other stipulations and rules that might qualify or disqualify you from receiving the earned income tax credit. If you're not certain if you qualify for the credit, consult IRS guidance or your tax advisor.
Consider Tax Credit Options for Large Purchases
Taxpayers who purchase an electric vehicle in 2024 may qualify for a tax credit up to $7,500. Rather than waiting until you file taxes next spring, you can actually take the credit as a rebate when you buy the vehicle—or as a discount on the price of your EV.
To get the clean vehicle tax credit, you must meet income limits and attest that you’re purchasing the vehicle for your own use, to be used in the United States. Not every EV qualifies, so check FuelEconomy.gov to find out whether the vehicle you’re considering will allow you to take the credit.
Additional 2024 Tax Changes to Know About
The IRS has made a variety of other changes that may affect your tax liability for tax year 2024.
New tax threshold on capital gains. Capital gains taxes are levied on the sale of capital assets, such as stocks, bonds, valuable items like jewelry and real estate. For the 2024 tax year, individual tax filers will not have to pay any capital gains tax if their total taxable income is $47,025 or less. That’s an increase from the income threshold of $44,625 in 2023. The capital gains tax rate jumps to 15% if your income is $47,026 to $518,900. If your income is higher than that, you’ll pay 20% in capital gains if you sell your investments.
Changes to the kiddie tax. For a child wage earner under age 19, the first $1,300 of any unearned income is tax free in 2024. According to the IRS, "unearned income" includes investment-type income such as taxable interest, ordinary dividends, and capital gain distributions. The next $1,300 is taxed at the child’s rate. Any unearned income above $2,600 is taxed at the parents’ tax rate.
Flexible spending account increases. The dollar limit for flexible spending accounts (FSA) increases to $3,200 in 2024. If you don’t use all the money in your FSA and your plan allows you to carry over unused amounts, you can carryover up to $640 in this tax year.
Health savings account deductible increases. To qualify for a health savings account (HSA) in 2024, participants' insurance plans must have an annual deductible between $2,800 and $4,150 for individuals, with a maximum out-of-pocket expense amount of $5,550. For family coverage, the annual deductible must be between $5,550 and $8,350, with an out-of-pocket expense limit of $10,200. If you participate in an HSA plan, you can contribute more to your plan this year: up to $4,150 for individuals and up to $8,300 for families.
Increased foreign earned income exclusion. If you earn income in a foreign country or from an employer in a foreign country, you may benefit from the foreign earned income exclusion, which increased to $126,500 in 2024.
Estate exemption increase. If a family member dies during 2024, their estate has a basic estate tax exclusion amount of $13.6 million, an increase from $12.92 million for estates owned by people who died in 2023.
Gift tax exclusion increase. If you want to give money to friends or family members, you can give up to $18,000 to each individual in 2024 before incurring gift tax. That’s an increase over the $17,000 exclusion in 2023.
While it's important to educate yourself, it can be even more helpful to work with a tax professional when it comes to navigating the constantly changing tax code. If you have other financial needs, our wealth planners are ready to speak with you and your tax advisors.
