2024 Tax Changes

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 * While this checklist outlines important tax changes for 2024, additional changes in tax law are more than likely to come up during the year ahead.  

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On a yearly basis, the Internal Revenue Service (IRS) adjusts more than 60 tax provisions for inflation to prevent what is called “bracket creep.” Bracket creep occurs when inflation, rather than real increases in income, pushes people into higher income tax brackets or reduces the value they receive from credits and deductions.

The IRS previously used the Consumer Price Index (CPI) as a measure of inflation prior to 2018. However, with the Tax Cuts and Jobs Act of 2017 (TCJA), the IRS now uses the Chained Consumer Price Index (C-CPI) to adjust income thresholds, deduction amounts, and credit values accordingly.

The new inflation adjustments are for tax year 2024, for which taxpayers will file tax returns in early 2025.

2024 Federal Income Tax Brackets and Rates

In 2024, the income limits for all tax brackets and all filers will be adjusted for inflation and will be as follows (Table 1). The federal income tax has seven tax rates in 2024: 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 37 percent. The top marginal income tax rate of 37 percent will hit taxpayers with taxable income above $609,350 for single filers and above $731,200 for married couples filing jointly.

Table 1. 2024 Federal Income Tax Brackets and Rates for Single Filers, Married Couples Filing Jointly, and Heads of Households

• 2024 Tax Brackets: Single Filer
  

If taxable income is:                                                                                The tax due is:
Not over $11,600                                                                                    10% of taxable income
Over $11,600 but not over $47,150 $1,160 plus                12% of the excess over $11,600
Over $47,150 but not over $100,525 $5,426 plus              22% of the excess over $47,150
Over $100,525 but not over $191,950 $17,168.50 plus 24% of the excess over $100,525
Over $191,950 but not over $243,725 $39,110.50 plus 32% of the excess over $191,150
Over $243,725 but not over $609,350 $55,678.50 plus 35% of the excess over $243,725
Over $609,350 $183,647.25 plus                                                  37% of the excess over $609,350

• 2024 Tax Brackets: Married Filing Separately

If taxable income is:                                                                                 The tax due is:
Not over $11,600                                                                                     10% of taxable income
Over $11,600 but not over $47,150 $1,160 plus                  12% of the excess over $11,600
Over $47,150 but not over $100,525 $5,426 plus               22% of the excess over $47,150
Over $100,525 but not over $191,950 $17,168. 50 plus 24% of the excess over $100,525
Over $191,950 but not over $243,725 $39,110.50 plus 32% of the excess over $191,150
Over $243,725 but not over $365,600 $55,678.50 plus 35% of the excess over $243,725
Over $365,600 $98,334.75 plus                                                     37% of the excess over $365,600

• 2024 Tax Brackets: Head of Household
  

If taxable income is:                                                                         The tax due is:
Not over $16,550                                                                              10% of taxable income
Over $16,550 but not over $63,100 $1,655 plus          12% of the excess over $16,550
Over $63,100 but not over $100,500 $7,241 plus       22% of the excess over $63,100
Over $100,500 but not over $191,950 $15,469 plus 24% of the excess over $100,500
Over $191,950 but not over $243,700 $37,417 plus 32% of the excess over $191,150
Over $243,700 but not over $609,350 $53,977 plus 35% of the excess over $243,700
Over $609,350 $181,954.50 plus                                           37% of the excess over $609,350

• 2024 Tax Brackets: Married Filing Jointly
  

If taxable income is:                                                                            The tax due is:
Not over $23,200                                                                                10% of taxable income
Over $23,200 but not over $94,300 $2,320 plus            12% of the excess over $23,200
Over $94,300 but not over $201,050 $10,852 plus       22% of the excess over $94,300
Over $201,050 but not over $383,900 $34,337 plus    24% of the excess over $201,050
Over $383,900 but not over $487,450 $78,221 plus    32% of the excess over $383,900
Over $487,450 but not over $731,200 $111,357 plus 35% of the excess over $487,450
Over $731,200 $196,669.50 plus                                              37% of the excess over $731,200

Standard Deduction and Personal Exemption

The standard deduction will increase by $750 for single filers and by $1,500 for joint filers (Table 2). Seniors over age 65 may claim an additional standard deduction of $1,950 for single filers and $1,550 for joint filers.

The personal exemption for 2024 remains at $0 (eliminating the personal exemption was part of the Tax Cuts and Jobs Act of 2017 (TCJA).

• Table 2. 2024 Standard Deduction
  

Filing Status                                                                   Deduction Amount
Single                                                                                  $14,600
Married Filing Jointly                                               $29,200
Head of Household                                                    $21,900
Additional Amount for Married Seniors       $1,550
Additional Amount for Unmarried Seniors $1,950

Alternative Minimum Tax

The alternative minimum tax (AMT) was created in the 1960s to prevent high-income taxpayers from avoiding the individual income tax. This parallel income tax system requires high-income taxpayers to calculate their tax bill twice: once under the ordinary income tax system and again under the AMT. The taxpayer then needs to pay the higher of the two.

The AMT uses an alternative definition of taxable income called alternative minimum taxable income (AMTI). To prevent low- and middle-income taxpayers from being subject to the AMT, taxpayers are allowed to exempt a significant amount of their income from AMTI. However, the exemption phases out for high-income taxpayers. The AMT is levied at two rates: 26 percent and 28 percent.

The AMT exemption amount for 2024 is $85,700 for singles and $133,300 for married couples filing jointly (Table 3).

• Table 3. 2024 Alternative Minimum Tax (AMT) Exemptions
  

Filing Status                        Exemption Amount
Unmarried Individuals $85,700
Married Filing Jointly   $133,300

In 2024, the 28 percent AMT rate applies to excess AMTI of $232,600 for all taxpayers ($116,300 for married couples filing separate returns).

AMT exemptions phase out at 25 cents per dollar earned once AMTI reaches $609,350 for single filers and $1,218,700 for married taxpayers filing jointly (Table 4).

• Table 4. 2024 Alternative Minimum Tax (AMT) Exemption Phaseout Thresholds
  

Filing Status                        Threshold
Unmarried Individuals $609,350
Married Filing Jointly   $1,218,700

Child Tax Credit

The maximum child tax credit is $2,000 per qualifying child and is not adjusted for inflation. The refundable portion of the child tax credit is adjusted for inflation and will increase from $1,600 to $1,700 for 2024.

Capital Gains Tax Rates and Brackets (Long-Term Capital Gains)

Long-term capital gains face different brackets and rates than ordinary income (Table 6.)

• Table 6. 2024 Capital Gains Tax Brackets
  

For   Unmarried Individuals, Taxable Income Over For Married Individuals Filing Joint Returns, Taxable Income Over For Heads of Households, Taxable Income Over
0%   $0                                                                   $0                                                                                              $0
15% $47,025                                                     $94,050                                                                                 $63,000
20% $518,900                                                  $583,750                                                                               $551,350

Qualified Business Income Deduction (Sec. 199A)

The Tax Cuts and Jobs Act of 2017 (TCJA) includes a 20 percent deduction for pass-through businesses. Limits on the deduction begin phasing in for taxpayers with income above $191,950 (or $383,900 for joint filers) in 2024 (Table 7).

• Table 7. 2024 Qualified Business Income Deduction Thresholds
  

Filing Status                        Threshold
Unmarried Individuals $191,950
Married Filing Jointly   $383,900

Annual Exclusion for Gifts

In 2024, the first $18,000 of gifts to any person are excluded from tax, up from $17,000. The exclusion is increased to $185,000 from $175,000 for gifts to spouses who are not citizens of the United States.

New for 2024

• The Alternative Minimum Tax exemption amount for tax year 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 tax year 2024 maximum Earned Income Tax Credit amount is $7,830 for qualifying taxpayers who have three or more qualifying children, an increase of from $7,430 for tax year 2023. The revenue procedure contains a table providing maximum EITC amount for other categories, income thresholds and phase-outs.
  

• For tax year 2024, the monthly limitation for the qualified transportation fringe benefit and the monthly limitation for qualified parking increases to $315, an increase of $15 from the limit for 2023.

• For the taxable years beginning in 2024, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements increases to $3,200. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount is $640, an increase of $30 from taxable years beginning in 2023.
  

• For tax year 2024, participants who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible that is not less than $2,800, an increase of $150 from tax year 2023, but not more than $4,150, an increase of $200 from tax year 2023. For self-only coverage, the maximum out-of-pocket expense amount is $5,550, an increase of $250 from 2023. For tax year 2024, for family coverage, the annual deductible is not less than $5,550, an increase of $200 from tax year 2023; however, the deductible cannot be more than $8,350, an increase of $450 versus the limit for tax year 2023. For family coverage, the out-of-pocket expense limit is $10,200 for tax year 2024, an increase of $550 from tax year 2023.
  

• For tax year 2024, the foreign earned income exclusion is $126,500, increased from $120,000 for tax year 2023.
  

• Estates of decedents who die during 2024 have a basic exclusion amount of $13,610,000, increased from $12,920,000 for estates of decedents who died in 2023.
  

• The annual exclusion for gifts increases to $18,000 for calendar year 2024, increased from $17,000 for calendar year 2023.
  

• The maximum credit allowed for adoptions for tax year 2024 is the amount of qualified adoption expenses up to $16,810, increased from $15,950 for 2023.
  

Items unaffected by indexing

By statute, certain items that were indexed for inflation in the past are currently not adjusted.

• The personal exemption for tax year 2024 remains at 0, as it was for 2023. This elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act.
  

• For 2024, as in 2023, 2022, 2021, 2020, 2019 and 2018, there is no limitation on itemized deductions, as that limitation was eliminated by the Tax Cuts and Jobs Act.
  

• The modified adjusted gross income amount used by taxpayers to determine the reduction in the Lifetime Learning Credit provided in § 25A(d)(2) is not adjusted for inflation for taxable years beginning after Dec. 31, 2020. The Lifetime Learning Credit is phased out for taxpayers with modified adjusted gross income in excess of $80,000 ($160,000 for joint returns).