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The new year brings new tax brackets, deductions, and limits that will impact your 2024 federal income tax return. While 2023 did not see major federal tax reform legislation, the IRS has adjusted ranges for tax brackets, standard deductions, retirement savings contributions and more to account for inflation. These 2024 IRS tax code tweaks affect taxpayers across income levels and will change how much you owe or your refund amount. Understanding the latest IRS adjustments will allow you to update your withholding and take advantage of any new breaks. A financial advisor can help you stay up to date on the latest in tax rules and regulations.
Tax Change Basics
The five major 2024 tax changes cover income tax brackets, the standard deduction, retirement contribution limits, the gift tax exclusion and phase-out levels for Individual Retirement Account (IRA) deductions, Roth IRAs and the Saver’s Credit. This annual inflation adjustment ensures that taxpayers aren’t bumped into higher brackets due to cost-of-living increases rather than pay raises.
While many adjustments are relatively minor, even small tweaks can add up to substantial savings or higher bills. For example, an upper-middle class couple could bank over $1,000 more by making the most of increased 401(k) contributions and shifting IRA deductibility planning.
2024 Tax Changes You Need to Know
Here are brief descriptions of the major 2024 tax updates affecting taxpayers:
Income Tax Bracket
There income brackets for marginal tax rates were adjusted to reflect inflation for 2024 returns. Here’s how they shake out:
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37% for individual taxpayers with incomes over $609,350, and $731,200 for married couples filing jointly
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35% for individual taxpayer incomes over $243,725, and $487,450 for married couples filing jointly
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32% for individual taxpayer incomes over $191,950, and $383,900 for married couples filing jointly
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24% for individual taxpayer incomes over $100,525, and $201,050 for married couples filing jointly
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22% for individual taxpayer incomes over $47,150, and $94,300 for married couples filing jointly
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12% for individual taxpayer incomes over $11,600, and $23,200 for married couples filing jointly
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10% for individual taxpayer incomes of $11,600 or less, and $23,200 or less for married couples filing jointly
Standard Tax Deduction
The standard deduction rose $1,500 from 2023 to $29,200 for married couples filing jointly. Single taxpayers and married individuals filing separately can take a standard deduction of $14,600, an increase of $750. Heads of households get a $21,900 standard deduction, up $1,100.
Contribution Limits for Retirement Plans
The most an employee can contribute to a 401(k) plan in 2024 will be $23,000, a $500 increase from 2023. This limit also applies to 403(b) and most 457 plans, as well as the Thrift Savings plan for federal employees. For people with Individual Retirement Accounts, the limit was raised to $7,000 from $6,500. The IRA catch-up contribution limits to retirement plans for people aged 50 and over were not changed.
Gift Tax Limit
The amount of the annual exclusion for gifts rises $1,000 for 2024, from $17,000 to $18,000.
Tax Credit and Deduction Changes
In 2024, mostly higher income ranges will be used to determine a taxpayer’s eligibility to deduct IRA contributions, contribute to Roth IRAs and claim the Saver’s Credit. Here are details:
Ranges for phasing out IRA contribution deductibility apply based on filing status and whether the taxpayer or a spouse is covered by a workplace retirement plan as follows:
|
Filing status and coverage |
Phase-out Range |
Change |
|
Single taxpayer covered by workplace retirement plan |
$77,000 and $87,000 |
Up from $73,000 and $83,000 |
|
Married people filing jointly covered by workplace retirement plans |
$123,000 and $143,000 |
Up from $116,000 and $136,000 |
|
Single taxpayer not covered by workplace retirement plan but married to someone who is covered |
$230,000 and $240,000 |
Up from $218,000 and $228,000 |
|
Married filing separately not covered by a plan |
$0 and $10,000 |
No change |
Roth IRA contributions are also subject to income-based phase-outs and most of those ranges increased in 2024 as well. Phase-out ranges vary based on filing status as follows:
|
Filing status |
Phase-out Range |
Change |
|
Single and head of household |
$146,000 and $161,000 |
Up from $138,000 and $153,000 |
|
Married filing jointly |
$230,000 and $240,000 |
Up from $218,000 and $228,000 |
|
Married filing separately |
$0 and $1,000 |
No change. |
The income limit for the Saver’s Credit is based on based on filing status and is adjusted as follows:
|
Filing status |
Income limit |
Change |
|
Single and married filing separately |
$38,250 |
Up from $36,500 |
|
Married filing jointly |
$76,500 |
Up from $73,000 |
|
Head of household |
$57,375 |
Up from $54,750 |
Bottom Line
The 2024 tax adjustments made by the IRS to income tax brackets, the standard deduction, retirement savings limits, and phase-outs will collectively impact taxpayers across income levels. While many of the specific changes are relatively small inflation adjustments, they add up to real impacts on your tax bill or refund. As with every tax year, it pays to be aware of any changes that are relevant to your specific tax scenario.
Tax Planning Tips
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Meeting with a financial advisor can help you apply the new 2024 IRS tax rules to your personal finance and tax planning picture. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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SmartAsset’s Federal income tax calculator is updated with each year’s changes in time for you to file your next return.
Photo credit: ©iStock/BartekSzewczyk, ©iStock/tommaso79, ©iStock/Ivanko_Brnjakovic
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