Every year, Congress makes what’s known as inflation adjustments and hands down the changes to the IRS to implement. The adjustment will be about 5.4 percent in 2024, which is smaller than last year’s 7 percent. The IRS has announced changes to tax rules for 2024 as inflation adjustment measures.
The changes will take effect when people file their federal income tax returns in 2025. Several of the changes will be of major interest to the average taxpayer, depending on their individual circumstances. Everyone needs to understand how important it is to claim the appropriate amount of withholding tax.
The standard deduction for the 2024 tax year will increase by $750 for those that are single or couples filing separately, by $1,100 for heads of household, and by $1,500 for couples filing jointly.
The U.S. has 7 tax brackets. Individuals are taxed at rates of 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent and 37 percent, depending on income. Tax brackets and tax rates will remain the same, but income thresholds will change.
The result is that some people will remain in a lower tax bracket, while others who received a cost-of-living increase could find themselves in a higher tax bracket. An example is married filers. They’ll be able to make up to $94,300, while staying in the 12 percent tax bracket.
There will be some other adjustments that will affect the average taxpayer along with a major change for the wealthy.
- The Earned Income Credit increases to $7,830 for qualifying filers with 3 or more children.
- People with an FSA can contribute up to $3,200
- Those with an HSA can contribute $4,150 for their own coverage or $8,350 for family coverage
- The gift tax exclusion will increase to $18,000 per person in 2024.
- Estates valued at $3.6 million won’t be subject to estate taxes.
At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs. We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today (843) 347-0849 and discover why our clients return to Peavy and Associates, PC year after year!