7 Important Tax Changes You Need to Know for 2024

Tax season is just over the horizon, and soon we will crunch the numbers as we get ready to file returns.

In addition, the IRS has announced major adjustments to dozens of tax rules that will apply in 2024. These are changes that impact your taxes next year and will be reflected in the return you file in 2025.

Inflation has caused Americans more pain at the pump, the supermarket, and elsewhere. But the following IRS changes might allow you to keep more money in your pocket, making for a happier return in 2025.

The amount that employees can contribute to their 401(k) is increasing for 2024. It will be $23,000, a $500 boost from the $22,500 limit in 2023.

The “catch-up contribution” limit for workers 50 and older also will increase to $7,500. That means employees in this age bracket can contribute a total of $30,500 to their 401(k) next year.

As with many of the higher limits on this list, the IRS is raising the 401(k) contribution limit in response to the inflation that is surging through the U.S. economy.

The new contribution limit for traditional IRAs and Roth IRAs will be $7,000 in 2024, a $500 increase from 2023.

The catch-up contribution for those who are 50 or older is $1,000. That means folks in this age bracket can contribute a total of $8,000 to their IRA in 2024.

Health savings account contribution limits are being increased for 2024 to adjust for inflation.

If your HSA covers only you as an individual, the new contribution limit is $4,150, up $300 from 2023. For HSAs that cover a family, the contribution limit is increasing to $8,300, up $550 from 2023.

To qualify to contribute to an HSA plan in 2024, your deductible must be at least $1,600 for individual coverage, or $3,200 for family coverage. Annual out-of-pocket expense maximums cannot exceed $8,050 for self-only coverage and $16,100 for family coverage.

Pro tip: Contributing to an HSA, IRA, or 401(k) is a great way to shore up your finances. If your salary doesn't allow you to contribute to one of these plans, explore one of the endless ways to make extra cash.

The standard deduction has been raised for 2024. The new deductions are:

• $29,200 for married couples filing jointly (up from $27,700 in 2023)
• $14,600 for single filers and married individuals filing separately (up from $13,850 in 2023)
• $21,900 for heads of households (up from $20,800 in 2023)

Marginal tax rates will look different in 2024 due to inflation. The rates themselves — 10%, 12%, 22%, 24%, 32%, 35%, and 37% — haven’t been adjusted, but the thresholds have.

The new marginal tax rate — the rate you pay on an additional dollar of income — thresholds are as follows:

• 37% for incomes over $609,350 ($731,200 for married couples filing jointly)
• 35% for incomes over $243,725 ($487,450 for married couples filing jointly)
• 32% for incomes over $191,950 ($383,900 for married couples filing jointly)
• 24% for incomes over $100,525 ($201,050 for married couples filing jointly)
• 22% for incomes over $47,150 ($94,300 for married couples filing jointly)
• 12% for incomes over $11,600 ($23,200 for married couples filing jointly)
• 10% for incomes of $11,600 or less ($23,200 for married couples filing jointly)

The earned income tax credit is designed to help low- and moderate-income workers with their taxes by reducing the amount they owe.

For 2024, the amount is $7,830 for taxpayers who have three or more qualifying children. That is up from $7,430 in 2023. The IRS has an online tool that can help you learn if you qualify.

The IRS has increased the threshold for how long-term capital gains are taxed in 2024.

The zero-rate amount applies to gains between:

• $0 and $94,050 for married couples filing jointly
• $0 to $63,000 for heads of households
• $0 to $47,025 for married couples filing separately and single filers

The maximum 15% amount applies to gains between:

• $94,050 - $583,750for married couples filing jointly
• $63,000 - $551,350 for heads of households
• $47,025 - $291,850 for married couples filing separately
• $47,025 - $518,900 for single filers

Anything above those upper limits is taxed at 20%. Short-term capital gains are still taxed as ordinary income.

Inflation has hit American families hard. The changes the IRS has made to 2024 taxes mean workers can keep more money out of Uncle Sam’s hands starting in January.

During this era of rising prices, that's welcome news for anyone trying to prevent financial stress from making life more difficult.