The Internal Revenue Service (IRS) recently announced updates to tax brackets, deductions, and other provisions for the 2024 tax year. These changes, outlined in Revenue Procedure 2023-34, will generally apply to tax returns filed in 2025.
Key Changes for Individuals:
- Standard Deduction: Good news for taxpayers! The standard deduction increases for all filing statuses:
- Married filing jointly: $29,200 (up $1,500)
- Single and married filing separately: $14,600 (up $750)
- Head of household: $21,900 (up $1,100)
- Tax Brackets: No major changes here. The top tax rate of 37% remains for high earners, while other rates adjust slightly for inflation.
- Alternative Minimum Tax (AMT): The AMT exemption rises to $85,700 and starts phasing out at higher income levels.
- Earned Income Tax Credit (EITC): The maximum EITC amount for families with three or more qualifying children increases to $7,830. Check the revenue procedure for details on other categories and income thresholds.
- Transportation and Healthcare Benefits: Monthly limits for qualified transportation and parking benefits, as well as contributions to health flexible spending arrangements, see small increases.
- Medical Savings Accounts (MSAs): Deductible and out-of-pocket expense limits for MSAs rise for both individual and family coverage.
Other Notable Changes:
- Foreign earned income exclusion, estate tax exemption, annual gift exclusion, and adoption credit all receive inflation adjustments.
- Certain items like the personal exemption and itemized deduction limitation remain unchanged due to previous tax legislation.
Stay Informed:
For a complete overview of all changes, consult Revenue Procedure 2023-34 on the IRS website.
