Federal 2024 Tax Updates

As we near the 2024 tax season, keeping up with the latest updates is essential. Changes to tax brackets, standard deductions, capital gains rates, and contributions for retirement and Health Savings Accounts (HSAs) can have a significant impact on your finances. Whether you are an individual taxpayer, running a small business, or preparing for retirement, being aware of these updates can help you make better financial decisions and optimize your tax strategy for the upcoming year.

New Federal Tax Brackets

The IRS has updated the federal income tax brackets for 2024 in response to inflation. This means taxpayers might find themselves in different brackets than in previous years, affecting their overall tax strategy. Here's a look at the new tax brackets:

2024 Federal Income Tax Brackets

For Single Filers:

• 10%: $0 to $11,600

• 12%: $11,600 to $47,150

• 22%: $47,150 to $100,525

• 24%: $100,525 to $191,950

• 32%: $191,950 to $243,725

• 35%: $243,725 to $609,350

• 37%: $609,350 or more

  
  

For Married Individuals Filing Jointly:

• 10%: $0 to $23,200

• 12%: $23,200 to $94,300

• 22%: $94,300 to $201,050

• 24%: $201,050 to $383,900

• 32%: $383,900 to $487,450

• 35%: $487,450 to $731,200

• 37%: $731,200 or more

  
  

For Heads of Households:

• 10%: $0 to $16,550

• 12%: $16,550 to $63,100

• 22%: $63,100 to $100,500

• 24%: $100,500 to $191,950

• 32%: $191,950 to $243,700

• 35%: $243,700 to $609,350

• 37%: $609,350 or more

  
  

These bracket adjustments can create opportunities for different tax planning strategies, especially for those whose income is near the threshold of different brackets.

Capital Gains Rates

Capital gains tax rates are also adjusted annually and can affect taxpayers who sell assets. For 2024, the rates are as follows:

For Single Filers:

• 0%: $0 to $47,025

• 15%: $47,025 to $518,900

• 20%: $518,900 or more

  
  

For Married Individuals Filing Jointly:

• 0%: $0 to $94,050

• 15%: $94,050 to $583,750

• 20%: $583,750 or more

  
  

For Heads of Households:

• 0%: $0 to $63,000

• 15%: $63,000 to $551,350

• 20%: $551,350 or more

  
  

Understanding these thresholds is critical for anyone thinking about selling investments, as the taxed profits can vary significantly based on your total income. These capital gains rates apply to long-term capital gains on assets held for more than one year.

Standard Deduction Changes

The standard deduction has increased for the 2024 tax year. This change makes it easier for taxpayers to benefit from a simplified deduction rather than itemizing.

2024 Standard Deduction Amounts

• Single: $14,600

• Married Filing Jointly: $29,200

• Head of Household: $21,900

  
  

Additional Standard Deduction for Seniors (age 65 or older):

• Married Seniors (each spouse): $1,550

• Unmarried Seniors: $1,950

Health Savings Account (HSA) Contribution Limits

Health Savings Accounts, or HSAs, offer tax benefits while covering medical expenses. For 2024, the contribution limits have been raised:

• Individual Coverage: $4,150

• Family Coverage: $8,300

  
  

Additionally, individuals aged 55 or older can contribute an extra $1,000. HSAs provide tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. This makes them an attractive option for managing healthcare costs while saving on taxes.

Disclaimer: This post is for informational purposes only and should not be considered tax, legal, or financial advice. Every individual's financial situation is unique, and tax laws are complex and frequently change. Please consult a qualified tax advisor or attorney for guidance tailored to your specific circumstances.