January brings not just resolutions, but also the annual rendezvous with the IRS. While tax season often elicits groans, 2024’s filing landscape boasts some significant alterations.
Understanding these updates is important for ensuring accurate returns and potentially maximizing your refund.
Standard deduction adjustments
To ensure tax brackets do not unfairly push you into a higher rate due to rising costs, the IRS has adjusted the income thresholds for each bracket for 2024. This means more money stays in your pocket before Uncle Sam takes his share. The standard deduction, the amount you can deduct without itemizing expenses, also sees a boost, rising to $14,600 for single filers and $29,200 for married couples filing jointly.
Contribution limits to retirement accounts like IRAs and 401(k)s are on the rise. You can now put $6,500 in an IRA (if you’re under 50) and $23,000 in a 401(k), both up from 2023. The more you put away now, the less financial stress you will deal with in your retirement.
The annual gift tax exclusion, the amount you can give to someone tax-free, increases to $18,000 in 2024. That means spreading some holiday cheer or helping a loved one with a big purchase just got a little easier (and cheaper!).
With the tax code constantly evolving, keeping yourself informed is important. Remember, knowledge is power, and when it comes to taxes, a little extra power can go a long way and can mean a great deal of savings in the long run.