Adjusted Inflation-Figures for 2024

January 2, 2024 by Gordon Advisors

The following information is provided by the IRS. For more information on the 2024 inflation figures please visit IRS.gov or contact our team.

The IRS has revealed revisions to around 60 tax provisions for the year 2024. While these adjustments may not influence your tax filing in the spring, they may have an impact on your federal income tax returns in early 2025. As we prepare our client’s tax returns, our team is monitoring the following changes to better advise our clients.

Standard Deduction Changes:

In 2024, the standard deduction for married couples filing jointly has increased to $29,200, up by $1,500 from the previous year. Single taxpayers and married individuals filing separately will see their standard deduction rise to $14,600 for 2024, an increase of $750 from 2023. Meanwhile, heads of households can expect a standard deduction of $21,900 for tax year 2024, marking an increase of $1,100 from the previous year.

Tax Rates for Net Capital Gain:

For individuals, net capital gain is taxed at lower federal tax rates than ordinary income tax rates. The capital gains tax rates on net capital gain (and qualified dividends) are 0%, 15% and 20%, depending on the taxpayer’s filing status and taxable income. Capital gain on collectibles is taxed at a maximum rate of 28% depending on the taxpayer’s ordinary income.

For Example:
In 2024, individuals with taxable income of $47,025 or less for single filers and $94,050 or less for married couples filing jointly may be eligible for the 0% long-term capital gains rate.

Long-Term Care Premiums:

The amount of eligible long-term care premiums that can be treated as paid for medical care and deductible as a medical expense is limited and varies according to the age of the taxpayer. The limitation amounts are adjusted annually for inflation to account for any increase in the cost of medical care.

For Example:
The newly announced 2024 deductible limit for individuals aged 70 or older is $5,880, compared to the 2023 limit of $5,960 for the same age group. This represents a considerable tax deduction, especially for couples who may be able to deduct up to $11,760 depending on their age.

It’s important to note that only long-term care policies meeting the federal government’s tax-qualified requirements are eligible for potential tax deductions. Many of the popular linked benefits or hybrid life insurance policies do not qualify for tax benefits.

Additionally, retirees with lower income levels may find it easier to reach the required health expense threshold to make their premiums deductible.

Child Tax Credit:

In the tax year 2024 (for tax returns filed in 2025), the child tax credit (CTC) will amount to $2,000 per eligible child, with the potential for $1,700 to be refundable through the additional child tax credit. Additionally, a $500 other dependent credit (ODC) will be available for dependents who are not a qualifying child. No portion of the ODC will be refundable.

Gifts and Estates:

In the year 2024, the basic exclusion amount for estates of decedents who pass away has been set at $13,610,000, which represents an increase from the previous amount of $12,920,000 for estates of decedents who died in 2023. Furthermore, the annual exclusion for gifts has been raised to $18,000 for the calendar year 2024, marking an increase from the previous amount of $17,000 in 2023.

Retirement Plans:

The IRS has announced an increase in the contribution limits for 401(k) and IRA accounts for the year 2024. The 401(k)-contribution limit has been raised to $23,000, while the IRA contribution limit has been increased to $7,000.

Taxpayers are eligible to deduct contributions to a traditional IRA if they meet specific criteria. However, if either the taxpayer or their spouse was covered by a retirement plan at work during the year, the deduction may be reduced or phased out, depending on their filing status and income. The phase-out ranges for 2024 are as follows:

• For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to between $77,000 and $87,000, up from between $73,000 and $83,000.
• For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to between $123,000 and $143,000, up from between $116,000 and $136,000.
• For IRA contributors who are not covered by a workplace retirement plan and are married to someone who is covered, the phase-out range is increased to between $230,000 and $240,000, up from between $218,000 and $228,000.
• For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.

To view the IRS’ entire list of changes for 2024 click below.

Contact Us:

Gordon Advisors is here to provide you with timely advice for savings. As we move into the new year, for more information on how these changes could affect your tax life and savings reach out to one of our trusted tax advisors.