IRS NEWS
Standard deduction increased
The IRS often makes inflation adjustments, and this year is no different. For the 2024 tax year, the IRS has announced an increase in the standard deduction amount. For married couples filing jointly, the standard deduction is now $29,200, an increase of $1,500 from 2023. For single taxpayers and married individuals filing separately, the standard deduction is $14,600, an increase of $750. Finally, for the heads of households, the standard deduction is $21,900, an increase of $1,100. If you are new to standard deductions, the IRS has more information listed on their website.
14 states decrease income tax rates
Many states found themselves with a revenue surplus as a result of the COVID-19 pandemic, and have decreased their income tax rate accordingly. According to the Tax Foundation, taxpayers in 14 states will be lucky enough to pay less income tax in 2024. These states include Arkansas, Connecticut, Georgia, Indiana, Iowa, Kentucky, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North Carolina, Ohio, and South Carolina. On the other hand, taxpayers in Michigan will see an increased income tax rate of 4.25%, up from 4.05% in 2023.
IRA and 401(k) limits have increased
In the US, individual retirement accounts, like a 401(k) or an IRA, have contribution limits in place to prevent high earners from benefiting more than the average worker. However, these limits are also subject to change based on inflation amounts. The IRS has announced a change that could impact individuals looking to contribute more to their retirement accounts in 2024. The contribution limit for employees who participate in 401(k), 403(b), and most 457 plans has increased to $23,000 from $22,500. Additionally, the limit on annual contributions to an IRA for individuals increased to $7,000, up from $6,500.
How to manage your tax compliance
No matter the tax type, compliance can be challenging. For many businesses and individuals, managing tax requirements might require assistance. We encourage you to reach out to a tax professional that specializes in the specific tax type guidance.
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.
Your new year paycheck might have different withholding amounts for federal taxes. Effective Jan 1 2024, IRS has updated the federal tax brackets. The rates remain at 0%, 10%, 12%, 22%, 24%, 32%, 35%, or 37% but the ranges have been adjusted for inflation.
For single taxpayers and married individuals filing separately, the standard deduction rises to $14,600 for 2024, an increase of $750 from 2023; and for heads of households, the standard deduction will be $21,900 for tax year 2024, an increase of $1,100 from the amount for tax year 2023.