In 2024, the Internal Revenue Service (IRS) is adjusting tax brackets and the standard deduction by 5.4% due to inflation, creating unique tax planning opportunities. These changes, aimed at offsetting the impact of inflation on taxes, mean that portions of your income could be taxed at lower rates.
Key Adjustments and Opportunities:
- Tax Brackets Increase: The threshold for the top federal income-tax bracket will rise significantly. For married couples, the 37% rate applies to incomes over $731,200, and for individuals, it starts at $609,350.
- Effective Tax Rate vs. Top Rate: Your effective tax rate, a blended rate of various tax slices, is typically lower than your top tax bracket rate. Understanding this can significantly aid in tax planning.
- Standard Deduction Rises: For individuals, the standard deduction is now $14,600, and for married couples, it’s $29,200. Most taxpayers benefit more from this than from itemizing deductions.
- Capital Gains Tax Opportunities: The 0% capital-gains tax rate now applies to single filers with incomes up to $47,025 and married couples up to $94,050. This presents a chance to sell appreciated assets with little to no capital gains tax.
- Estate and Gift-Tax Thresholds: The federal estate-tax exclusion amount is $13.61 million for 2024. Additionally, the annual tax-free gift limit is $18,000. These changes offer substantial estate planning and gifting opportunities.
- Retirement Account Limits: The contribution limit for 401(k)s is $23,000, and for IRAs, it’s $7,000. These higher limits provide more scope for retirement savings.
However, not all rates are adjusted for inflation. For instance, the 3.8% tax on investments remains the same, potentially affecting more taxpayers, especially with higher interest incomes.
Why Bennett, Bennett & Trice?
At Bennett, Bennett & Trice, our experienced accountants can help you navigate these changes and maximize your tax-saving opportunities. Whether it’s understanding the new tax brackets, planning for retirement contributions, or strategizing estate and gift taxes, we’re here to provide expert guidance.
Ready for Tax Planning? Contact Us!
Don’t let these tax changes catch you off guard. Contact Bennett, Bennett & Trice today to start your personalized tax planning and make the most of the 2024 tax adjustments. Our team is ready to assist you in optimizing your tax situation and financial planning. Call or visit us for expert tax help and guidance.