Hey everyone! I’m Bette Hochberger, CPA, CGMA. The IRS has recently released its tax inflation adjustments for the 2024 tax year, and there are several significant changes that taxpayers and professionals alike should be aware of. Here’s a comprehensive overview of what’s new and what’s changing.

New Developments Starting in 2023

A notable change is the reinstatement of the Hazardous Substance Superfund financing rate, under the Inflation Reduction Act, for crude oil received at U.S. refineries and petroleum products entering the United States for consumption or warehousing. 

Beginning in 2024, the tax rate for these will be $0.26 per barrel, adjusted for inflation. This rate is a sum of the Hazardous Substance Superfund rate and the Oil Spill Liability Trust Fund financing rate.

Adjustments in Standard Deductions and Marginal Rates

For the tax year 2024, the standard deduction sees an increase across the board:

– Married Couples Filing Jointly: $29,200 (up by $1,500 from 2023).

– Single Taxpayers and Married Filing Separately: $14,600 (up by $750 from 2023).

– Heads of Households: $21,900 (up by $1,100 from 2023).

The marginal rates for 2024 also undergo adjustments, with the top tax rate at 37% for incomes exceeding $609,350 for single taxpayers and $731,200 for married couples filing jointly. The tax rate tiers for lower income brackets are also updated accordingly.

Alternative Minimum Tax and Earned Income Tax Credit

The Alternative Minimum Tax (AMT) exemption amount for 2024 is set at $85,700, phasing out at $609,350 ($133,300 for married couples filing jointly, phasing out at $1,218,700). 

This is a slight increase from the 2023 amounts. Additionally, the Earned Income Tax Credit for those with three or more qualifying children is raised to $7,830.

Adjustments in Employee Benefits and Savings Accounts

Other notable adjustments include:

– The monthly limitation for qualified transportation fringe benefits and qualified parking rises to $315.

– The dollar limitation for employee contributions to health flexible spending arrangements increases to $3,200, with the maximum carryover amount being $640.

– For Medical Savings Accounts, adjustments are made to the minimum and maximum deductible amounts for both self-only and family coverages.

Foreign Earned Income Exclusion and Estate Exclusions

The foreign earned income exclusion is now $126,500, up from $120,000. Additionally, estates of descendants who die during 2024 have a basic exclusion amount of $13,610,000, a significant increase from 2023.

Gift and Adoption Credit Adjustments

The annual exclusion for gifts is set at $18,000 for 2024, and the maximum credit allowed for adoptions is now $16,810.

Unchanged Items

It’s important to note that certain items remain unchanged due to statutory provisions. The personal exemption remains at 0, as set by the Tax Cuts and Jobs Act. Similarly, there is no limitation on itemized deductions, and the phase-out for the Lifetime Learning Credit remains unadjusted.

I hope you all learned something new today. It’s important to stay informed about these upcoming changes. I’ll see you all again next time!