Every year brings new tax law changes to keep American taxpayers on their toes, and 2024 is no different. From simple inflation updates to changes in Form 1099-K reporting requirements, here’s everything you need to know about 2024 tax changes before you file your income tax return.
At a glance:
The standard deduction has increased, as have contribution limits for retirement accounts.
Reporting thresholds for Form 1099-K have dropped, meaning more people should receive this form this year.
Some tax credits also saw changes, including the EITC and Adoption Credit.
Federal tax bracket changes for 2024
The Internal Revenue Service (IRS) tweaks the tax brackets with yearly inflation adjustments. This means you could find yourself in a lower tax bracket, even if your income hasn’t changed much.
Important contribution changes for 2024
401(k) contributions: Individuals can contribute up to $23,000 to 401(k) plans in 2024 (up from $22,500 in 2023). If you are 50 or older, you can contribute up to $30,500.
IRA contributions: The annual contribution limit for IRAs in 2024 is $7,000 (up from $6,500 in 2023). If you are 50 or older, you can contribute up to $8,000. If you have a SIMPLE IRA, you can contribute up to $16,000 in 2024 (up from $15,500 in 2023).
Health flexible spending accounts: In 2024, you can contribute up to $3,200 in employee salary reductions to fund your health flexible spending arrangement.
Medical Savings Accounts (MSAs): Deductible ranges and out-of-pocket expenses for MSAs also increased. For individuals with self-only coverage, the plan must have an annual deductible of at least $2,800, at most $4,150, and an out-of-pocket expense limit of $5,550. For families, the annual deductible must be at least $5,550 but no more than $8,350, with an out-of-pocket expense limit of $10,200.
Other 2024 tax changes
Social Security tax limit: For 2024, the maximum earnings subject to the Social Security payroll tax increased to $168,600 (up from $160,200 in 2023). This means the maximum Social Security tax you can have withheld from your paycheck in 2024 will be $10,453.20.
Alternative minimum tax (AMT): The Alternative Minimum Tax exemption amount for 2024 is $85,700 (up from $81,300) and begins to phase out at $609,350. The AMT exemption for married couples filing jointly is $133,300 (up from $126,500) and begins to phase out at $1,218,700.
Bonus depreciation: In 2024, businesses can deduct 60% in first-year bonus depreciation (down from 80% in 2023).
Fringe benefits: The monthly limit for tax-free qualified transportation and parking fringe benefits increased to $315 (up from $300 in 2023).
Gift tax exclusions: The annual gift tax exclusion increased to $18,000 for 2024 (up from $17,000 in 2023). You can gift someone up to this amount during the tax year without filing a gift tax return. The lifetime exclusion also increased to $13.61 million (up from $12.92 million).
Qualified adoption expenses: The maximum credit for adoption expenses increased to $16,810 (up from $15,950 in 2023).
Foreign earned income exclusion: For 2024, the foreign earned income exclusion (FEIE) available to expats is $126,500 (up from $120,000 in 2023). If you qualify, you can exclude foreign earnings from your income up to this amount.
We’ve covered most of the basics, but you can view the official IRS announcement of 2024 inflation changes on irs.gov.
What hasn’t changed from last year?
While many things change in tax law from year to year, some things stay the same. Here are a few constants from last year’s tax code that you can still count on in 2024:
The Child Tax Credit amount remains the same as in tax year 2023 (up to $2,000 per qualifying child).
There continues to be no limit on itemized deductions.
The personal exemption remains at 0 due to the Tax Cuts and Jobs Act.
The modified adjusted gross income (MAGI) amount used by joint filers to determine the Lifetime Learning Credit (LLC) reduction was not adjusted for inflation. The LLC begins phasing out once your MAGI exceeds $80,000 ($160,000 for joint filers).
The bottom line
That’s a wrap on what’s new (and what’s not) for 2024 taxes. We know taxes are often the last thing you want to think about, but knowing what has changed from last year can help you better prepare for the coming tax season while minimizing unpleasant surprises (like a large tax bill). Don’t forget to check for any state tax and local tax updates as well, and remember — TaxAct is here to guide you when you’re ready to file.
