The Internal Revenue Service (IRS) recently issued a series of inflation adjustments that will affect more than 60 tax provisions for the 2024 fiscal year. Small business owners should note these developments since they might substantially influence their financial planning and tax strategy.
The Inflation Reduction Act, which preserves the financing rate for hazardous substances Superfund for crude oil and some petroleum products, is one of the significant adjustments for 2024. This change lowers the tax rate to $0.26 per share for crude oil or petroleum products entered after December 31, 2016.
In 2024, the standard deduction will increase, giving households some relief. The deduction for married couples filing jointly will increase by $1,500 in 2023 to $29,200. The standard deduction for taxpayers who are single or married but file separately will increase by $750 to $14,600. The deduction for heads of families will increase by $1,100 to $21,900.
Additionally, the maximum tax rate for single taxpayers making more than $609,350 and married couples filing jointly with incomes over $731,200 will remain at 37% for 2024. However, the following is how other marginal rates are adjusted:
- 35% of earnings over $243,725 ($487,450 for joint-filing couples)
- 32% of earnings over $191,950 ($383,900 for jointly filed married couples)
- 24% of earnings over $100,525 ($201,050 for jointly filed married couples)
- 22% of earnings over $47,150 ($94,300 for jointly filed married couples)
- 12% on earnings over $11,600 ($23,200 for jointly filed married couples)
- The lowest rate for single people making $11,600 or less is 10% ($23,200 for married couples filing jointly).
Other changes include:
- Salary reductions for employees under health flexible spending plans have a $3,200 limitation and a $640 carryover restriction.
- Medical Savings Account requirements are adjusted, with minimum annual deductibles set at $2,800 for self-coverage and $5,550 for family coverage.
- The foreign-earned income exclusion increases to $126,500.
- The basic exclusion amount for estates of decedents who die during 2024 is now $13,610,000.
- The gift exclusion for the year has been increased to $18,000.
- As of right now, the maximum adoption credit is $16,810.