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.
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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.
Here are brief descriptions of the major 2024 tax updates affecting taxpayers:
There income brackets for marginal tax rates were adjusted to reflect inflation for 2024 returns. Here’s how they shake out:
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.
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.
The amount of the annual exclusion for gifts rises $1,000 for 2024, from $17,000 to $18,000.
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 |
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.
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Mark HenricksMark Henricks has reported on personal finance, investing, retirement, entrepreneurship and other topics for more than 30 years. His freelance byline has appeared on CNBC.com and in The Wall Street Journal, The New York Times, The Washington Post, Kiplinger’s Personal Finance and other leading publications. Mark has written books including, “Not Just A Living: The Complete Guide to Creating a Business That Gives You A Life.” His favorite reporting is the kind that helps ordinary people increase their personal wealth and life satisfaction. A graduate of the University of Texas journalism program, he lives in Austin, Texas. In his spare time he enjoys reading, volunteering, performing in an acoustic music duo, whitewater kayaking, wilderness backpacking and competing in triathlons.
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