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Plan Ahead for Tax Season 2024
Planning ahead could make tax season less stressful.
You found all the papers, filed all the forms, and discovered if you got a refund or owed taxes. But before you close the door on taxes until next year, check out these changes that may impact your 2024 taxes.
Quick note: the information below is for federal income tax returns. Each state has their own rules and regulations around income tax, and some states don’t have any income tax.
This information is not tax or investment advice. You should consult with a tax advisor and/or a qualified investment professional for advice specific to your particular circumstances.
Key Takeaways
Taxpayers may take advantage of higher contribution limits for retirement accounts, including 401(k)s and IRAs, as well as a higher gifting limit.
Depending on your financial situation, you may choose to update your paycheck withholdings.
The IRS adjusted tax brackets for 2024 by approximately 5.4% in response to inflation.
IRS Changes for Tax Season 2024
Below we’ll cover a few of the changes that may impact your 2024 tax returns, the ones you’re filing in 2025.
Updated Tax brackets
In November 2023, the IRS revealed the federal income tax brackets for 2024, with each tier being adjusted approximately 5.4% higher because of inflation.1 There are still seven tax rates for federal taxes, but the income ranges have changed slightly for 2024.2
Tax Brackets 2024
Tax Rate | Taxable Income (Single) | Taxable Income (Married Filing Jointly) | Taxable Income (Married Filing Separately) | Head of Household |
|---|---|---|---|---|
10% | $0 – $11,600 | $0 – $23,200 | $0 – $11,600 | $0 – $16,550 |
12% | $11,600 – $47,150 | $23,200 – $94,300 | $11,600 – $47,150 | $16,550 – $63,100 |
22% | $47,150 – $100,525 | $94,300 – $201,050 | $47,150 – $100,525 | $63,100 – $100,500 |
24% | $100,525 – $191,950 | $201,050 – $383,900 | $100,525 – $191,950 | $100,500 – $191,950 |
32% | $191,950 – $243,725 | $383,900 – $487,450 | $191,950 – $243,725 | $191,950 – $243,700 |
35% | $243,725 – $609,350 | $487,450 – $731,200 | $243,725 – $365,600 | $243,700 – $609,350 |
37% | $609,350 and over | Over $731,200 | Over $365,600 | Over $609,350 |
In addition to adjusting the tax brackets, the IRS also announced changes to the standard deductions for 2024. Standard deductions are $14,600 for single filers, $29,200 for married couples filing jointly, and $20,800 for head of household filers.3
With the new tax brackets, you may find that you need to adjust your federal and state paycheck withholdings. Changing your withholding impacts your take-home pay throughout the year. Withholdings are important because the amount you choose may influence whether or not you receive a refund after filing your tax returns or owe the government money.
Consult with a tax professional about your specific situation.
Pump up the (Retirement) Party
That’s right, the IRS has increased the contribution limits for 401(k)s and IRAs!4 This means you could contribute more money to your retirement accounts and, in many cases, lower your taxable income for the year.
2024 401(k) and IRA Contribution Limits
The IRA and 401(k) contributions limit for all individuals increased $500 in 2024, however catch-up contributions for individuals over 50 remained the same for both plans.5
Account Type | 2024 Contribution Limit | 2024 Catch-Up Limit (for individuals over 50) |
|---|---|---|
Roth or Traditional 401(k) | $23,000 | $7,500 |
Roth or Traditional IRA | $7,000 | $1,000 |
Note that these limits apply to the collective amount you contribute to your accounts. So, if you have a traditional IRA and a Roth IRA, you can’t contribute more than $7,000 between the two accounts. (Unless you’re over 50 and are able to utilize the catch-up contribution.)
Before opening or contributing to an IRA or Roth IRA, be sure to check the income restrictions on these accounts to ensure you are making the most of the account.
Experts often recommend maxing out your retirement contributions whenever possible to set yourself up for the Golden Years. These retirement contributions could also provide deductions for you if you itemize your taxes. Your financial and tax advisors could help confirm what is best for your specific situation.
Who Doesn’t Like a Gift?
Thinking about gifting someone money? Many people seek to help loved ones with down payments on big purchases. If you keep these gifts under $18,000 per person in 2024, you don’t have to report it on your federal tax return.6
This means you may give up to $18,000 total to as many people as you like. If you’re married, you and your spouse could give up to $36,000 combined.
If you give over these limits, your excess gifts are counted against your federal lifetime exemption amount, which is currently set at $13.61 million.7 You probably don’t need to worry about this limit but hey, you never know!
Final Thoughts
Planning ahead for the next tax season may ease your frustration when next April rolls around. And, with the right research, you may be able to lower your tax bill along the way.
Keep an eye out throughout the year for updates from the IRS on any changes that may affect your tax returns and consult with a tax expert to help you ensure you have everything in order.