Every year, the IRS makes inflation adjustments for various tax provisions. By accounting for inflation, the IRS aims to prevent individuals and businesses from being inadvertently pushed into higher tax brackets, thus preserving the integrity of the taxation framework. We’ve outlined the 2024 updates for you to stay aware of throughout the new year.

2024 Standard Deductions

IRA

The IRA contribution limit for 2024 is $7,000, a $500 increase from 2023. The 2024 IRA catch-up contributions remain at $1,000.

401(k) Plans

In 2024, the maximum contribution limit for employees in 401(k) plans will rise to $23,000 while the catch-up contributions available for individuals aged 50 and above will stay constant at $7,500.

Alternative Minimum Tax Exemption

The 2024 AMT exemption threshold is $85,700 and begins to phase out at $609,350 for single filers or heads of household. For married couples filing jointly, the threshold begins at $133,300 and phases out at $1,218,700.

Earned Income Tax Credit

The 2024 maximum Earned income Tax Credit for qualifying taxpayers with three or more qualifying children is $7,830.

Qualified Transportation Fringe Benefit & Qualified Parking

The monthly limitation for the qualified transportation fringe benefit and the monthly limitation for qualified parking for tax year 2024 is $315.

Medical Savings Account – MSA

For participants who have self-only coverage in a Medical Savings Account for tax year 2024, the plan must have an annual deductible of between $2,800 and $4,150. For family coverage, the plan must have an annual deductible must be between $5,550 and $8,350. The maximum out-of-pocket expense amount for self-only coverage is $5,550. For family coverage, this limit is $10,200.

Flexible Spending Account – FSA

For the taxable years beginning in 2024, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements increases to $3,200. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount is $640, an increase of $30 from taxable years beginning in 2023.

Health Savings Account – HAS

Taxpayers who have individual coverage under a High Deductible Health Plan(HDHP), the plan must have an annual deductible not less than $1,600 and a maximum out-of-pocket expense of $8,050, can contribute up to $4,150 in 2024. Taxpayers with family coverage under a HDHP, the plan must have an annual deductible not less than $3,200 and maximum out-of-pocket expense of $16,100, can contribute up to $8,300 in 2024.  Individuals over 55 can contribute an additional $1,000 per year to the HSA.

Foreign Earned Income Exclusion

The 2024 foreign earned income exclusion, for qualifying US citizens or US resident aliens with tax homes in a foreign country, is $126,500.

Estates of Decedents

Estates of individuals who pass away in 2024 possess a basic exclusion amount of $13,610,000. This is an increase from the $12,920,000 basic exclusion amount for estates of decedents who passed away in 2023.

Gifts

The 2024 annual exclusion for gifts has increased by $1,000 for 2023, at $18,000 for tax year 2024.