The new year brings with it new tax brackets, deductions and limits that will impact your 2024 tax return. For basic tax planning, it is good to be aware of the changes so that you can plan for the year ahead. We have outlined some of the key changes below.
Although the marginal tax rates remain unchanged the federal tax brackets have all increased for 2024. We will see the top tax bracket (37% tax rate) increase to $609,350 for single filers and $731,200 for those who are married filing jointly.
The standard deduction for all has also increased. Single filers will receive a standard deduction of $14,600, up by $750, while married filing jointly standard deduction will be $29,200, up by $1,500.
The Foreign Earned Income Exclusion for 2024 will be $126,00, up from $120,000.
There have also been changes in how much you can contribute to your retirement plan. You can contribute up to $23,000 into your 401k plan. The annual contribution limit for IRA’s has also increased to $7,000 ($8,000 if you are aged 50 and over).
We will also see an increase in the Estate Tax lifetime exclusion from $12,920,000 to $13,610,000. The annual gift exclusion has also increased from $17,000 to $18,000 meaning a married couple can now make a gift of up to $36,000 without using their Estate tax exclusion. We have covered this in some more detail below.
It is also important to note that the IRS has updated their penalties for late filing of Tax Returns. The late filing penalty is 5% of your unpaid taxes for each month your return is late, up to a maximum of 25%. In 2024, if your tax return is not filed within 60 days of the due date, you’ll be charged a minimum late filing fee of $510 or 100% of taxes owed, whichever is lower. The penalty for late payment of taxes remained unchanged and is based on the amount of time your overdue taxes remain outstanding. This number will not exceed 25% of your unpaid taxes. For failing to pay the amount shown as tax on your tax return, you’ll be penalized 0.5% of the unpaid taxes for each month or part of the month the tax remains unpaid. As always it is important to ensure your taxes are paid on time and your Tax Returns and tax forms are filed on time to avoid penalties. Please keep an eye out for our email reminders throughout the year.
We will be happy to answer any questions you have on the 2024 changes so feel free to get in touch.