March 7, 2024 2:39 am

Plan Now, Save Later

As you prepare and file your 2023 income tax return now is a perfect time to consider strategies to maximize your 2024 income tax return savings. The IRS has announced the annual inflation adjustments for the 2024 tax year, which affect more than 60 tax provisions. These changes will apply to the income you earn in 2024 and report on your tax return in 2025. Here are some of the most important changes you need to know:

Higher Standard Deduction Amounts

The standard deduction is the amount you can subtract from your taxable income if you do not itemize your deductions. The standard deduction amounts for 2024 have increased by $750 for single filers and married individuals filing separately, by $1,500 for married couples filing jointly and qualifying surviving spouse, and by $1,100 for the head of household filing status. The table below shows the standard deduction amounts for each filing status comparing 2023 and 2024.

2023 2024
Single $13,850 $14,600
Married Filing Joint $27,700 $29,200
Married Filing Separate $13,850 $14,600
Head of Household $20,800 $21,900
Qualifying Surviving Spouse $27,700 $29,200

 

If you are 65 or older, or blind, you are eligible for an additional standard deduction. For 2024, the additional standard deduction amounts are $1,850 for single filers or heads of households, and $1,500 for married filers or a qualifying surviving spouse.

If you itemized in 2023, consider whether or not you will itemize in 2024. To the extent you are right on the edge of itemizing it may make sense to use a strategy we call “bunching” to push you into itemization. For example, if you regularly donate to your favorite charity during the holiday season, consider deferring one year’s donation a couple of weeks until after 12/31. This would then “bunch” two donations into one year (assuming you again donate during the holiday season of the subsequent year). This strategy can be used for other itemized deductions such as medical expenses.

Adjusted Income Tax Brackets

The income tax brackets are the ranges of income that are taxed at different rates. The income tax brackets for 2024 have been adjusted for inflation, which means you can earn more income before being bumped into a higher tax bracket. The table below shows the income tax brackets and rates for each filing status comparing 2023 and 2024.

Single Taxpayers
2023 2024
Tax Rate on taxable income from up to Tax Rate on taxable income from up to
10% $0 $11,000 10% $0 $11,600
12% $11,001 $44,725 12% $11,601 $47,150
22% $44,726 $95,375 22% $47,151 $100,525
24% $95,376 $182,100 24% $100,526 $191,950
32% $182,101 $231,250 32% $191,951 $243,725
35% $231,251 $578,125 35% $243,726 $609,350
37% $578,126 And up 37% $609,351 And up

 

Married Filing Jointly or Qualifying Surviving Spouse Taxpayers
2023 2024
Tax Rate on taxable income from up to Tax Rate on taxable income from up to
10% $0 $22,000 10% $0 $23,200
12% $22,001 $89,450 12% $23,201 $94,300
22% $89,451 $190,750 22% $94,301 $201,050
24% $190,751 $364,200 24% $201,051 $383,900
32% $364,201 $462,500 32% $383,901 $487,450
35% $462,501 $693,750 35% $487,451 $731,200
37% $693,751 And up 37% $731,201 And up

 

Married Filing Separate Taxpayers
2023 2024
Tax Rate on taxable income from up to Tax Rate on taxable income from up to
10% $0 $11,000 10% $0 $11,600
12% $11,001 $44,725 12% $11,601 $47,150
22% $44,726 $95,375 22% $47,151 $100,525
24% $95,376 $182,100 24% $100,526 $191,950
32% $182,101 $231,250 32% $191,951 $243,725
35% $231,251 $346,875 35% $243,726 $365,600
37% $346,876 And up 37% $365,601 And up

 

Head of Household Taxpayers
2023 2024
Tax Rate on taxable income from up to Tax Rate on taxable income from up to
10% $0 $15,700 10% $0 $11,600
12% $15,701 $59,850 12% $11,601 $47,150
22% $59,851 $95,350 22% $47,151 $100,525
24% $95,351 $182,100 24% $100,526 $191,950
32% $182,101 $231,250 32% $191,951 $243,725
35% $231,251 $578,100 35% $243,726 $609,350
37% $578,101 And up 37% $609,351 And up

 

While it is hard to plan around bracket changes, it’s important to keep these in mind if your filing status changes. If you get married or divorced during the year be sure to update your withholdings with your employer by filing an updated Form W-4. If your 2023 tax return had too large of a refund or amount due filing an updated Form W-4 may also be helpful.

Other Notable Changes

The Alternative Minimum Tax exemption amount for 2024 is $85,700 and begins to phase out at $609,350 ($133,300 for married couples filing jointly for whom the exemption begins to phase out at $1,218,700). For comparison, the 2023 exemption amount was $81,300 and began to phase out at $578,150 ($126,500 for married couples filing jointly for whom the exemption began to phase out at $1,156,300).

The Earned Income Tax Credit maximum amount for 2024 is $7,830 for qualifying taxpayers who have three or more qualifying children, an increase from $7,430 for 2023.

The annual exclusion for gifts is $18,000 for 2024, up from 2023’s amount of $17,000.

The contribution limit for 401(k), 403(b), and most 457 plans is $23,000 for 2024, an increase from $22,500 for 2023. The catch-up contribution limit for employees aged 50 and over who participate in these plans also increased from $6,500 to $7,000.

The amount individuals can contribute to their SIMPLE retirement accounts is increased to $16,000, up from $15,500. However, the catch-up contribution limit for employees 50 and over who participate in SIMPLE plans remains $3,500 for 2024.

The contribution limit for Individual Retirement Arrangements (IRAs) increased from $6,500 to $7,000 for 2024. The catch-up contribution limit for individuals aged 50 and over also remains unchanged at $1,000.

Adjusting your retirement deferrals is a great way to impact your current tax situation. Keep these adjusted amounts in mind as they pertain to your personal financial goals.

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Tax Glossary

Standard deduction

A fixed deduction allowed to taxpayers who do not itemize deductions. The amount depends on filing status, age, and blindness.

More terms