5 Key Changes to 2024 Taxes
The standard deduction increased slightly
After an inflation adjustment, the 2024 standard deduction increases to $14,600 for single filers and married couples filing separately and to $21,900 for single heads of household, who are generally unmarried with one or more dependents. For married couples filing jointly, the standard deduction rises to $29,200.
The Child Tax Credit could give you a tax break
Tax credits, which reduce the tax you owe dollar for dollar, are normally better than deductions, which reduce how much of your income is subject to tax. In 2024, the Child Tax Credit is $2,000 per child age 17 or younger. The credit is also subject to a phase-out starting at $400,000 for joint filers and $200,000 for single filers. For other qualified dependents, you can claim a $500 credit.
IRA and 401(k) limits are slightly higher
The traditional IRA and Roth contribution limits in 2024 increased slightly from 2023. Individuals can contribute up to $7,000 to an IRA, and those age 50 and older also qualify to make an additional $1,000 catch-up contribution. In addition, the 2024 contribution limits for tax-deferred 401(k)s and Roth 401(k)s have increased to $23,000. If you're age 50 or older, you qualify to make an additional $7,500 catch-up contribution for this tax year as well.
If you're able to, consider maxing out your contributions to these accounts. Doing so can provide a boost to your retirement savings and potentially provide a tax deduction.
You can save a bit more in your health savings account (HSA)
For 2024, the maximum you can contribute to an HSA is $4,150 for an individual and $8,300 for a family. People 55 and older can contribute an extra $1,000 catch-up contribution. To be eligible for an HSA, you must be enrolled in a high-deductible health plan (which usually has lower premiums as well). Learn more about the potential benefits of an HSA.
The estate tax exemption is even higher
The estate and gift tax exemption, which is indexed to inflation, rose to $13,610,000 for 2024. But the now-higher exemption is set to expire at the end of 2025, meaning it could be essentially cut in half at that time if Congress doesn't act.
The annual gift exclusion, which allows you to give money to your loved ones each year without incurring any tax liability or using up any of your lifetime estate and gift tax exemption, increases to $18,000 per recipient.
