2024 Tax Preparations and Updates

With the 2025 filing season approaching, taxpayers should be aware of federal tax law changes and updates that will affect individual 2024 income tax returns.

While the tax rates remain the same for the 2024 tax year, the income thresholds for all tax brackets increased in 2024 to reflect the rise in inflation.

2024 Marginal Income Tax Rates and Brackets
2024 Marginal Tax Rates	Single Tax Bracket	Married Filing Jointly Tax Bracket	Head of Household Tax Bracket	Married Filing Separately Tax Bracket
10%	$0 – 11,600	$0 – $23,200	$0 – $16,550	$0 – 11,600
12%	$11,601 – $47,150	$23,201 – $94,300	$16,551 – $63,100	$11,601 – $47,150
22%	$47,151– $100,525	$94,301 –$201,050	$63,101 – $100,500	$47,151– $100,525
24%	$100,526 – $191,950	$201,051 – $383,900	$100,501 – $191,950	$100,526 – $191,950
32%	$191,951 – $243,725	$383,901– $487,450	$191,951 – $243,700	$191,951 – $243,725
35%	$243,726- $609,350	$487,451– $731,200	$243,701– $609,350	$243,726- $365,600
37%	Over $609,350	Over $731,200	Over $609,350	Over $365,600

Standard Deductions in 2024

The IRS released new standard deductions for 2024 to adjust for inflation.

Standard Deduction
Filing Status	2024	2023
Single	$14,600	$13,850
Married Filing Jointly and Qualifying Widow(er)	$29,200	$27,700
Married Filing Separately	$14,600	$13,850
Head of Household	$21,900	$20,800

Health Savings Accounts

The IRS also announced new Health Savings Account (HSA) contribution limits for 2024, with amounts increasing to adjust for inflation.

HSA Inflation-Adjusted Limitations
	2024		2023
	Self-Only Coverage	Family	Self-Only Coverage	Family
Contribution Limit	$4,150	$8,300	$3,850	$7,750
Additional catch-up contribution for taxpayer age 55 or older	$1,000	$1,000 per qualifying spouse	$1,000	$1,000 per qualifying spouse
Minimum health insurance deductible	$1,600	$3,200	$1,500	$3,000
Maximum out-of-pocket	$8,050	$16,100	$7,500	$15,000

Retirement Plan Changes

The SECURE 2.0 Act of 2022 (Secure 2.0) bolsters retirement savings, with over 90 provisions with different effective dates. Among the changes that take effect this year are the following:

• People under age 59½ can take more penalty-free early withdrawals from IRAs and 401(k)s. Up to $10,000 for domestic abuse victims and $1,000 for emergencies can be taken without paying the 10% additional tax. Regular income tax would still be due.
• Leftover funds in 529 education accounts can be rolled over tax-free to a Roth IRA. Yearly rollover amounts cannot exceed the annual pay-in limit for Roth IRAs, which is $7,000 for 2024. The 529 account must have been open for more than 15 years, and there is a $35,000 lifetime cap.
• Roth 401(k) owners no longer need to take required minimum distributions. This conforms to the rule that applies to owners of Roth IRAs.
• Plan sponsors can create emergency savings accounts for participants, who could then make Roth pay-ins (on an after-tax basis) to that savings account within the plan. A participant’s account balance may not exceed $2,500.
• Student loan relief can be offered through workplace retirement plans. SECURE 2.0 allows employer 401(k) matches conditioned on student loan repayments made by employees.
• The qualified charitable distribution cap is indexed for inflation so that IRA owners 70½ and older can transfer up to $105,000 in 2024 from their IRAs directly to charity without having to pay tax on the withdrawal.

Additionally, key dollar limits on workplace retirement plans and IRAs increased in 2024. The maximum 401(k) contribution is $23,000. People born before 1975 can contribute an extra $7,500. These limits also apply to 403(b)s and 457 plans.

SIMPLEs have a $16,000 cap, plus $3,500 for individuals age 50 and older.

The 2024 contribution cap for traditional IRAs and Roth IRAs is $7,000, plus $1,000 as an additional catch-up contribution for individuals age 50 and older.

The income ceilings on Roth IRA pay-ins are higher for 2024. Contributions phase out at adjusted gross incomes of $230,000 to $240,000 for joint filers and $146,000 to $161,000 for single filers.

2024 deduction phaseouts for traditional IRAs range from adjusted gross incomes of $123,000 to $143,000 for joint filers covered by 401(k)s and $77,000 to $87,000 for single filers and heads of household. If only one spouse is covered by the plan, the phaseout range for deducting pay-ins for the uncovered spouse is $230,000 to $240,000.

Additional changes made under SECURE 2.0 are as follows:

• The limitation on premiums paid with respect to a qualifying longevity annuity contract to $200,000. For 2024, this limitation remains $200,000.
• Added an adjustment to the deductible limit on charitable distributions. For 2024, this limitation is increased to $105,000, up from $100,000.
• Added a deductible limit for a one-time election to treat a distribution from an individual retirement account made directly by the trustee to a split-interest entity. For 2024, this limitation is increased to $53,000, up from $50,000.

Details on these and other retirement-related, cost-of-living adjustments for 2024 are in Notice 2023-75 available on IRS.gov.

Gift and Estate Tax Exclusion

The lifetime estate and gift tax exemption for 2024 is $13,610,000.

More estate tax liability qualifies for an installment payment tax break. If one or more closely held businesses make up greater than 35% of a 2024 estate, as much as $740,000 of tax can be deferred, and the IRS will charge only 2% interest.

The annual gift tax exclusion for 2024 is $18,000 per donee. This means in 2024, you can gift up to $18,000 ($36,000 if your spouse agrees) to each child, grandchild or any other person without having to file a gift tax return or tap your lifetime estate and gift tax exemption. Annual gifts over the exclusion amount will trigger filing of a gift tax return for 2024, but no gift tax will be due unless your total lifetime gifts exceed $13,610,000.

Self-Employed Individuals

Sole proprietorships and owners of limited liability companies, S corporations, and other pass-through entities can continue to deduct up to 20% of their qualified business income (QBI) on their tax returns. With the QBI deduction, most self-employed taxpayers and small business owners can exclude up to 20% of their qualified business income from federal income tax (but not self-employment tax) whether they itemize or not. Once the 2024 taxable income reaches or exceeds $191,950 ($383,900 if filing jointly), the type of business also comes into play.

Other changes include:

• More companies can use the cash method of accounting. For taxable years beginning in 2024, C corporations with average annual gross receipts of $30 million or less over the previous three years can use the cash method. This threshold also applies to partnerships and LLCs that have C corporations as owners.

• The 2024 standard mileage rate for business driving is 67 cents per mile.

• First-year bonus depreciation isn’t as valuable in 2024. In 2023, businesses could deduct 80% of the cost of new and used qualifying business assets with lives of 20 years or less. This year, the 80% write-off decreases to 60%.

• Section 179 expensing is higher, $1,220,000 of assets can be expensed in 2024.
• This limit phases out dollar for dollar once more than $3,050,000 of assets are put into use in 2024.
• Note that the amount of business assets expensed can’t exceed the business’s taxable income. Bonus depreciation doesn’t have this rule.

Other Provisions

The IRS announced annual inflation adjustments for over 60 tax provisions in tax year 2025, including tax rate brackets, deductions, annual gift tax limitation, alternative minimum tax exemption, and retirement contribution limitations. For more information about tax rate schedules and other tax changes, see Rev. Proc. 2024-40.

The IRS also issued technical guidance regarding all cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2025 in Notice 2024-80, posted on IRS.gov.

The annual contribution limit for employees who participate in 401(k), 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan is increased to $23,500, up from $23,000.

The limit on annual contributions to an IRA remains $7,000. The IRA catch‑up contribution limit for individuals aged 50 and over was amended under the SECURE 2.0 Act of 2022 (SECURE 2.0) to include an annual cost‑of‑living adjustment but remains $1,000 for 2025

For more information, see highlights of changes for 2025, or visit the IRS website

Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties.