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In response to inflation, The IRS has adjusted marginal tax brackets and the standard deduction for 2024. As a result of the changes, many Americans will be able to keep more of their 2024 income.
Other big changes include increases to the allowed contribution amounts for tax-advantaged retirement savings accounts. You might see a slight increase in your paychecks, depending on your withholding. This is because of adjusted tax brackets and a larger standard deduction, among other tax changes.
Here’s a detailed look at these adjustments:
• Standard deduction changes for 2024. Standard deductions are set amounts by which taxpayers can lower their taxable income based on their filing status. For the tax year 2024, the standard deduction for married couples filing jointly rises to $29,200, an increase of $1,500 from 2023. For single taxpayers, the standard deduction rose to $14,600, a $750 increase from the previous year.
• Tax bracket changes in 2024. With new tax brackets in 2024, some taxpayers may find that their tax bill is lower than expected. For example, if you earned $46,000 in 2023, you were in the 22-percent federal income tax bracket. But with the same $46,000 income in 2024, you’d be in the 12-percent tax bracket.
• Retirement plan contribution changes. For 2024, taxpayers can increase their contributions to tax-advantaged retirement savings accounts. In 2024, the plan increases to $23,000 from $22,500 annually. The IRA contribution limit for 2024 is $7,000, a $500 increase from 2023.
• “529” account changes. Leftover funds in 529 education accounts can be rolled over tax-free to a Roth IRA. There is a $35,000-lifetime cap. Yearly rollover amounts can’t 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.
More next week, when I’ll go over other tax changes for 2024.
Barry Lisak is an IRS enrolled agent specializing in personal and small business taxes for 30 years. Any questions can be directed to him at 516-829-7283, or mrbarrytax@aol.com.
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