It’s never too early to start planning ahead to save money on taxes. The new inflation adjustments just announced are for tax year 2024, for which taxpayers will file tax returns in early 2025. With the brackets rising, some clients may get larger paychecks after taxes in 2024 as their effective rates go down for bigger portions of their respective incomes. Clients may want to consider booking some capital losses early in 2024 in order to provide “some wiggle room” in the rest of the year, and ramping up 401(k) and health savings account contributions to the maximum if they haven’t already done so. In 2025 and beyond, some folks could potentially see their tax brackets go up by 9%.
On a yearly basis, the IRS adjusts more than 60 tax provisions for inflation to prevent what is called “bracket creep.” Tax bracket creep occurs when inflation, rather than real increases in income, pushes people into higher income tax brackets or reduces the value they receive from credits and deductions. Beware the large jump in the marginal tax rate.
In 2024, the income limits for all tax brackets and all filers will be adjusted for inflation, see Table 1. The federal income tax has seven tax rates in 2024: 10, 12, 22, 24, 32, 35, and 37 percent. The top marginal income tax rate of 37% will hit taxpayers with taxable income above $609,350 for single filers and above $731,200 for married couples filing jointly.
Table 1. 2024 Federal Income Tax Brackets and Rates for Single Filers, Married Couples Filing Jointly, and Heads of Households
| Tax Rate | For Single Filers | For Married Individuals Filing Joint Returns | For Heads of Households |
| 10% | $0 to $11,600 | $0 to $23,200 | $0 to $16,550 |
| 12% | $11,600 to $47,150 | $23,200 to $94,300 | $16,550 to $63,100 |
| 22% | $47,150 to $100,525 | $94,300 to $201,050 | $63,100 to $100,500 |
| 24% | $100,525 to $191,950 | $201,050 to $383,900 | $100,500 to $191,950 |
| 32% | $191,950 to $243,725 | $383,900 to $487,450 | $191,950 to $243,700 |
| 35% | $243,725 to $609,350 | $487,450 to $731,200 | $243,700 to $609,350 |
| 37% | $609,350 or more | $731,200 or more | $609,350 or more |
The standard deduction will increase by $750 for single filers and by $1,500 for joint filers (Table 2). Seniors over age 65 may claim an additional standard deduction of $1,950 for single filers and $1,550 for joint filers.
Table 2. 2024 Standard Deduction
| Filing Status | Deduction Amount |
| Single | $14,600 |
| Married Filing Jointly | $29,200 |
| Head of Household | $21,900 |
| Additional Amount for Married Seniors | $1,550 |
| Additional Amount for Unmarried Seniors | $1,950 |
Qualified Business Income Deduction: The Tax Cuts and Jobs Act included a 20% deduction for pass-through businesses. Limits on the deduction begin phasing in for taxpayers with income above $191,950 (or $383,900 for joint filers) in 2024.
Annual Exclusion for Gifts: In 2024, the first $18,000 of gifts to any person are excluded from tax, up from $17,000. The exclusion is increased to $185,000 from $175,000 for gifts to spouses who are not citizens of the United States.
For items such as the Child Tax Credit, Long Term Capital Gains, Earned Income Tax Credit, Alternative Minimum Tax, etc, please reference the Tax Foundation link HERE.
Contact Us: December was your last chance to minimize taxes for 2023; don’t wait to start planning for savings in 2024. The boost of 5.4% is better than last year’s increase of more than 7%. Slight tweaks to federal income tax brackets and other inflation adjustments for next year could help our clients take home more dollars, and alongside the shifts to rules for retirement savings in 401(k) and individual retirement accounts also save a little bit more money in 2024, according to TFG Financial Advisors! Call toll free or contact us at cpa@fuoco.com and we can start running projections early in the year for you. We can help you explore the potential for flexibility with your tax strategy, and be more strategic with your deductions and investment strategies since there is more wriggle room to manage the current year’s tax liability.
