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Inflation Expected to Increase 2024 Tax Bracket Limits

Inflation Expected to Increase 2024 Tax Bracket Limits

Inflation caused a whopping 7.1% inflation-adjusted increase in tax bracket limits for 2023, and according to a new report from Bloomberg Tax, the inflation-adjusted amounts in the tax code are expected to rise 5.4% in 2024. This projection comes as the U.S. Bureau of Labor reported that the consumer price index increased 0.6% in August after a smaller increase of 0.2% in July.

Lower inflation in prior months was a sign of progress for many as individuals and business owners alike endured sustained rate hikes by the Federal Reserve, but it seems like inflation will once again have a significant impact on tax rates for 2024.

Comparison of 2023 tax brackets to the 2024 projections

Individual Income Tax Brackets (Married filing jointly)

 

2023

2024 Projections

10%

$0-$22,000

$0 to $23,200

12%

$22,001 to $89,450

$23,201 to $94,300

22%

$89,451 to $190,750

$94,301 to $201,050

24%

$190,751 to $364,200

$201,051 to $383,900

32%

$364,201 to $462,500

$383,901 to $487,450

35%

$462,501 to $693,750

$487,451 to $731,200

37%

$693,751 and above

$731,201 and above

 

Individual Income Tax brackets (Single filers)

 

2023

2024 Projections

10%

$0 to $11,000

$0 to $11,600

12%

$11,001 to $44,725

$11,601 to $47,150

22%

$44,726 to $95,375

$47,151 to $100,525

24%

$95,376 to $182,100

$100,526 to $191,950

32%

$182,101 to $231,250

$191,951 to $243,725

35%

$231,251 to $578,125

$243,726 to $609,350

37%

$578,126 and above

$609,351 and above

 

Standard Deduction

Filing status

2023

2024 Projections

Married Filing Jointly/Surviving Spouses

$27,700

$29,200

Heads of Household

$20,800

$21,900

All Other Taxpayers

$13,850

$14,600

 

Alternative Minimum Tax

Filing status

2023 Exemption

2024 Projections

Married Filing Jointly/Surviving Spouses

$126,500

$133,300

Unmarried Individuals

$81,300

$85,700

Married Filing Separately

$63,250

$66,650

Estates and Trusts

$28,400

$29,900

 

Qualified Retirement Contributions

Filing status

2023

2024 Projections

Married Filing Jointly

$116,000

$123,000

All Other Taxpayers

$73,000

$77,000

Married Filing Separately

$0

$0

Spouses Who Are Not Active Participants

$218,000

$230,000

 

Contributing factors for 2024 limit increases

The projections from Bloomberg factor in tax changes included in last year's Inflation Reduction Act and the SECURE 2.0 Act. For the Inflation Reduction Act, one major change is an increase in the Section 179D deduction for energy-efficient commercial building property if new wage and apprenticeship requirements are met. For the SECURE 2.0 Act, changes include an increase in the wage limitation amount for the additional Section 45E credit for small employer pension plan startup costs from $100,000 to $140,000.

Plan for the inflation-adjusted tax rates

Knowing that inflation will have a significant impact on the 2024 filing season, business owners and individuals will need to keep these higher thresholds in mind when planning for 2024. Estate and gift tax planning is one area that benefits from inflation-adjusted rates.

The annual exclusion for gifts has gone from $17,000 in 2023 to $18,000 in 2024, allowing for larger gifts without tax implications. And for any decedent dying in the calendar year, the basic exclusion amount is $13,610,000. Keep in mind that the favorable estate and gift tax exemption will expire in 2025 and revert to pre–Tax Cuts and Jobs Act levels, which will be much lower than current levels.

Fill out the form on this page to get in touch with our tax professionals to discuss tax planning and opportunities for tax savings.

 

09/25/2023

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