Key takeaways for 2024 tax changes

Here is a glimpse of the significant tax law changes for 2024, which will shape the fiscal tax year reflected on 2025 tax returns.     

• Tax bracket thresholds increased     
• Standard deduction increased   
• Contribution limits for retirement accounts increased   
• 1099-K reporting threshold dropped to $5,000    
• The EITC and Adoption Credit were updated  
• The refundable portion of the Child Tax Credit increased 

2024 Tax Brackets

2024 standard deduction rates

The IRS adjusts the standard deduction to reflect the rising cost of living every year. The standard deduction reduces your taxable income, and the amount you can claim depends on your filing status.

Here are the 2024 standard deduction amounts compared with 2023:

If you are blind or age 65 and up, you can claim an additional standard deduction:

1099-K reporting changes for 2024

For those receiving payments through third-party networks like PayPal, Venmo, or eBay, the 1099-K reporting requirements have been a hot topic. Here’s what’s changing for tax year 2024:

These changes mean that any earnings of $5,000 or more from payment platforms will trigger a 1099-K form in 2024. 

Tax Tip: Keep good records of your sales and payments through third-party platforms. It’s better to be over-prepared than to scramble for receipts in April.

Capital gains tax rates

Profits from selling assets, including stocks, real estate, crypto, etc., are subject to capital gains tax rates. Short-term gains (assets held for one year or less) are taxed as ordinary income. Long-term gains rates (for assets held over a year) max out at 20%. The 2024 long-term gain tax rates and brackets are:

Earned Income Tax Credit (EITC) changes for 2024

The EITC is a popular tax credit for low- to moderate-income working taxpayers. The amount you can claim depends on your income, filing status, and the number of children you have.

The maximum EITC you can claim for 2024 is $7,830. Below are the 2024 income limits for the credit this year:

Important contribution changes for 2024

• 401(k) contributions: Individuals can contribute up to $23,000 to 401(k) plans in 2024 (up from $22,500 in 2023). If you are 50 or older, you can contribute up to $30,500.
• IRA contributions: The annual contribution limit for IRAs in 2024 is $7,000 (up from $6,500 in 2023). If you are 50 or older, you can contribute up to $8,000. If you have a SIMPLE IRA, you can contribute up to $16,000 in 2024 (up from $15,500 in 2023).
• Health flexible spending accounts: In 2024, you can contribute up to $3,200 in employee salary reductions to fund your health flexible spending arrangement.
• Medical Savings Accounts (MSAs): Deductible ranges and out-of-pocket expenses for MSAs also increased. For individuals with self-only coverage, the plan must have an annual deductible of at least $2,800, at most $4,150, and an out-of-pocket expense limit of $5,550. For families, the annual deductible must be at least $5,550 but no more than $8,350, with an out-of-pocket expense limit of $10,200.

Other 2024 tax changes

• Social Security tax limit: For 2024, the maximum earnings subject to the Social Security payroll tax increased to $168,600 (up from $160,200 in 2023). This means the maximum Social Security tax you can have withheld from your paycheck in 2024 will be $10,453.20.
• Alternative minimum tax (AMT): The Alternative Minimum Tax exemption amount for 2024 is $85,700 (up from $81,300) and begins to phase out at $609,350. The AMT exemption for married couples filing jointly is $133,300 (up from $126,500) and begins to phase out at $1,218,700.
• Bonus depreciation: In 2024, businesses can deduct 60% in first-year bonus depreciation (down from 80% in 2023).
• Fringe benefits: The monthly limit for tax-free qualified transportation and parking fringe benefits increased to $315 (up from $300 in 2023).
• Gift tax exclusions: The annual gift tax exclusion increased to $18,000 for 2024 (up from $17,000 in 2023). You can gift someone up to this amount during the tax year without filing a gift tax return. The lifetime exclusion also increased to $13.61 million (up from $12.92 million).
• Qualified adoption expenses: The maximum credit for adoption expenses increased to $16,810 (up from $15,950 in 2023).
• Foreign earned income exclusion: For 2024, the foreign earned income exclusion (FEIE) available to expats is $126,500 (up from $120,000 in 2023). If you qualify, you can exclude foreign earnings from your income up to this amount.

We’ve covered most of the basics, but you can view the official IRS announcement of 2024 inflation changes on irs.gov.

What hasn’t changed from last year?

While many things change in tax law from year to year, some things stay the same. Here are a few constants from last year’s tax code that you can still count on in 2024:

• The Child Tax Credit amount remains the same as in tax year 2023 (up to $2,000 per qualifying child).
• There continues to be no limit on itemized dedections.
• The personal exemption remains at 0 due to the Tax Cuts and Jobs Act.
• The modified adjusted gross income (MAGI) amount used by joint filers to determine the Lifetime Learning Credit (LLC) reduction was not adjusted for inflation. The LLC begins phasing out once your MAGI exceeds $80,000 ($160,000 for joint filers).