It’s that time of year again—change is in the air. The weather is generally getting colder. Radio stations are phasing in more holiday music. And, even tax provisions are changing. On November 9, 2023, the Internal Revenue Service (“IRS”) announced inflation adjustments to several key tax provisions for the upcoming tax year 2024. See Rev. Proc. 2023-24. These changes will affect taxpayers when they file their income tax returns in 2025. Below is a quick summary of many of the key changes taxpayers can expect next year.

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Tax Rate Tables:

For taxable years beginning in 2024, the following tax rate table applies to single, unmarried individuals (excluding surviving spouses and heads of households):

- 10% for taxable income that is $11,600 or less;

- 12% for taxable income that is over $11,600;

- 22% for taxable income that is over $47,150;

- 24% for taxable income that is over $100,525;

- 32% for taxable income that is over $191,950;

- 35% for taxable income that is over $243,725; and

- 37% for taxable income that is over $609,350.

The following tax rate table applies to married individuals filing joint returns and surviving spouses:

- 10% for taxable income that is $23,200 or less;

- 12% for taxable income that is over $23,200;

- 22% for taxable income that is over $94,300;

- 24% for taxable income that is over $201,050;

- 32% for taxable income that is over $383,900;

- 35% for taxable income that is over $487,450; and

- 37% for taxable income that is over $731,200.

Additionally, the following tax rate table applies to heads of households: 

- 10% for taxable income that is $16,550 or less;

- 12% for taxable income that is over $16,550;

- 22% for taxable income that is over $63,100;

- 24% for taxable income that is over $100,500;

- 32% for taxable income that is over $191,950;

- 35% for taxable income that is over $243,700; and

- 37% for taxable income that is over $609,350.

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Capital Gains Rates:

For taxable years beginning in 2024, the following capital gains rate table applies to single, unmarried individuals (excluding surviving spouses and heads of households):

- 0% for taxable income that is $47,025 or less;

- 15% for taxable income that is over $47,025; and

- 20% for taxable income that is over $518,900.

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The following capital gains rate table applies to married individuals filing joint returns and surviving spouses: 

- 0% for taxable income that is $94,050 or less;

- 15% for taxable income that is over $94,050; and

- 20% for taxable income that is over $583,750.

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Additionally, the following capital gains rate table applies to heads of households:

- 0% for taxable income that is $63,000 or less;

- 15% for taxable income that is over $63,000; and

- 20% for taxable income that is over $551,350.

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Standard Deduction:

For taxable years beginning in 2024, the following standard deduction amounts apply:

- Single, unmarried individuals (excluding surviving spouses and heads of households): $14,600

- Married individuals filing joint returns and surviving spouses: $29,200

- Heads of households: $21,900

Additionally, for aged (over age 65) or blind individuals, taxpayers may enjoy an additional standard deduction amount of $1,550. The additional amount is further increased to $1,950 if the taxpayer is unmarried and not a surviving spouse.

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Certain Deductions and Contribution Limits:

For taxable years beginning in 2024, the $2,500 deduction for interest paid on qualified education loans begins to phase out for taxpayers with a modified adjusted gross income (“MAGI”) of $80,000 ($165,000 for joint returns). The deduction is completely phased out for taxpayers with a MAGI of $95,000 ($195,000 for joint returns).

Starting in 2024, the Section 199A qualified business income (“QBI”) threshold amounts and phase-in range amounts also increase:

- Married individuals filing joint returns: $383,900 threshold amount and $483,900 phase-in range amount;

- All other returns: $191,950 threshold amount and $241,950 phase-in range amount.

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Certain Tax Credits:

For taxable years beginning in 2024, the amount of the child tax credit that is refundable increases to $1,700.

Moreover, starting in 2024, the maximum adoption credit increases to $16,810.

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Gift and Estate Taxes:

For taxable years beginning in 2024, the lifetime exemption amount applicable to estates (for decedents who die during 2024) increases to $13,610,000.

Additionally, the annual gift tax exclusion increases to $18,000 per recipient, starting in 2024.

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For a complete review of the IRS’s new compliance efforts, click here.

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At Provident Financial Planning, our JD, CPA, CFP® team is here to guide you through your federal taxes from planning to preparation of your annual income tax returns. Schedule an appointment with us today over Zoom or in any of our offices in Southlake, Plano, Dallas, Houston, or Atlanta. Our team can help you implement a tax strategy tailored to you.

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