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The Internal Revenue Service (IRS) has recently announced a series of inflation adjustments for the tax year 2024. These changes, which are detailed in Revenue Procedure 2023-34, are set to impact more than 60 tax provisions, including tax rate schedules and other tax changes. 

This article aims to provide a comprehensive overview of these adjustments, ensuring that taxpayers are well-informed and prepared for the upcoming tax year.

Key Changes for 2024

Here are the 5 key changes that the IRS have introduced for the year 2024:

1. Standard Deduction Increases

• For married couples filing jointly, the standard deduction will rise to $29,200, up by $1,500 from 2023.
• Single taxpayers and married individuals filing separately will see their standard deduction increase to $14,600, a $750 rise.
• Heads of households will have a standard deduction of $21,900, up by $1,100.

2. Marginal Tax Rates

• The top tax rate remains at 37% for single taxpayers with incomes over $609,350 and $731,200 for married couples filing jointly.
• Other rates are adjusted accordingly, with the lowest rate being 10% for single individuals earning $11,600 or less, and $23,200 for married couples filing jointly.

3. Alternative Minimum Tax (AMT)

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

4. Earned Income Tax Credit (EITC)

The maximum EITC amount is $7,830 for taxpayers with three or more qualifying children, up from $7,430 in 2023.

5. Other Notable Adjustments

• The monthly limit for qualified transportation fringe benefits and parking rises to $315.
• Employee salary reductions for contributions to health flexible spending arrangements increase to $3,200.
• The foreign-earned income exclusion is $126,500, up from $120,000.
• The basic exclusion amount for estates of decedents who die during 2024 is $13,610,000.
• The annual exclusion for gifts is $18,000, up from $17,000.

What are the Unchanged Items?

The personal exemption remains at 0, continuing the trend set by the Tax Cuts and Jobs Act.

No limitation on itemized deductions, as per the same Act. The Lifetime Learning Credit phase-out thresholds remain unchanged.

Conclusion

The IRS's adjustments for the tax year 2024 reflect changes in the economy and are designed to help taxpayers navigate their financial responsibilities effectively.

Individuals and businesses must understand these changes to plan their finances and tax strategies accordingly. Consulting with a tax professional is recommended for personalized advice and guidance.

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FAQs

1. What are the new standard deduction amounts for 2024?

For 2024, the standard deduction is $29,200 for married couples filing jointly, $14,600 for single taxpayers and married individuals filing separately, and $21,900 for heads of households.

2. How have the tax brackets changed for the tax year 2024?

The top tax rate remains at 37% for incomes over $609,350 for single taxpayers and $731,200 for married couples filing jointly. Other tax brackets have also been adjusted accordingly.

3. What is the maximum Earned Income Tax Credit (EITC) for 2024?

The maximum EITC for 2024 is $7,830 for taxpayers with three or more qualifying children, an increase from $7,430 in 2023.

4. Are there any changes to the Alternative Minimum Tax (AMT) exemption for 2024?

Yes, the AMT exemption amount for 2024 is $85,700 and begins to phase out at $609,350 ($133,300 for married couples filing jointly, phasing out at $1,218,700).

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