IRS announces increase in standard deductions, marginal tax rates, other adjustments

The IRS announced last week that the standard deductions for all filing classifications will be increased for the 2024 tax season.

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The standard deduction for married couples filing jointly for tax year 2024 rises to $29,200; for single taxpayers and married individuals filing separately, the standard deduction rises to $14,600; and for heads of households, the standard deduction will be $21,900 for tax year 2024.

The new numbers represent an increase of between $1,100 to $1,500 per bracket, or, in other words, the amount you get to take off your tax bill right from the start.

Marginal tax rates

The IRS also announced the new marginal tax rates for 2024. The marginal tax rate is the tax rate you pay on your highest dollar of income.

The top tax rate remains 37% for individual single taxpayers with incomes greater than $609,350 ($731,200 for married couples filing jointly).

The other rates are:

• 35% for incomes over $243,725 ($487,450 for married couples filing jointly).
• 32% for incomes over $191,950 ($383,900 for married couples filing jointly).
• 24% for incomes over $100,525 ($201,050 for married couples filing jointly).
• 22% for incomes over $47,150 ($94,300 for married couples filing jointly).
• 12% for incomes over $11,600 ($23,200 for married couples filing jointly).
• The lowest rate is 10% for incomes of single individuals with incomes of $11,600 or less ($23,200 for married couples filing jointly).

In other adjustments

• The Alternative Minimum Tax exemption amount for tax year 2024 is $85,700 and begins to phase out at $609,350.
• The tax year 2024 maximum Earned Income Tax Credit amount is $7,830 for qualifying taxpayers who have three or more qualifying children.
• 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 health care “cafeteria” plans that allow the carryover of unused amounts, the maximum carryover amount is $640.
• Participants with self-only coverage in a Medical Savings Account must have an annual deductible that is not less than $2,800, but not more than $4,150 for tax year 2024. For self-only coverage, the maximum out-of-pocket expense amount is $5,550.
• For family coverage, the annual deductible is not less than $5,550 nor more than $8,350. For family coverage, the out-of-pocket expense limit is $10,200 for tax year 2024.
• The foreign earned income exclusion is $126,500.
• Estates of decedents who die during 2024 have a basic exclusion amount of $13,610,000.
• The annual exclusion for gifts increases to $18,000 for calendar year 2024.
• The maximum credit allowed for adoptions for tax year 2024 is the amount of qualified adoption expenses up to $16,810.