The IRS made changes for 2023 taxes (filed in 2024) to counter rising costs due to inflation, including Standard Deductions, Tax Brackets, Flexible Spending Accounts, and various other credits and limits.
Standard Deduction
The Standard Deduction indicates the portion of income not subject to tax that can be used to reduce one’s tax bill. Standard Deductions will rise an average of 5.4% for 2024 versus 6.9% for 2023.
| Filing Status | Standard Deduction 2022 | Standard Deduction 2023 | Standard Deduction 2024 |
|---|---|---|---|
| Individual or Married Filing Separately | $12,950 | $13,850 | $14,600 |
| Married Filing Jointly | $25,900 | $27,700 | $29,200 |
| Head of Household | $19,400 | $20,800 | $21,900 |
Tax Brackets
A comparison of income tax rates and ranges for 2023 and 2024 follows. The 2024 rates are projected until the IRS announces the final brackets soon.
Single Filing Individual Return
| Tax Rate | 2023 Taxable Income | 2024 Taxable Income |
|---|---|---|
| 10% | $0 to $11,000 | $0 to $11,600 |
| 12% | Over $11,000 to $44,725 | Over $11,600 to $47,150 |
| 22% | Over $44,725 to $95,375 | Over $47,150 to $100,525 |
| 24% | Over $95,375 to $182,100 | Over $100,525 to $191,950 |
| 32% | Over $182,100 to $231,250 | Over $191,950 to $243,725 |
| 35% | Over $231,250 to $578,125 | Over $243,725 to $609,350 |
| 37% | Over $578,125 | Over $609,350 |
Married Filing Joint Returns
| Tax Rate | 2023 Taxable Income | 2024 Taxable Income |
|---|---|---|
| 10% | $0 to $22,000 | $0 to $23,200 |
| 12% | Over $22,000 to $89,450 | Over $23,200 to $94,300 |
| 22% | Over $89,450 to $190,750 | Over $94,300 to $201,050 |
| 24% | Over $190,750 to $364,200 | Over $201,050 to $383,900 |
| 32% | Over $364,200 to $462,500 | Over $383,900 to $478,450 |
| 35% | Over $431,900 to $647,850 | Over $478,450 to $731,200 |
| 37% | Over $647,850 | Over $731,200 |
Married Filing Separate Returns
| Tax Rate | 2023 Taxable Income | 2024 Taxable Income |
|---|---|---|
| 10% | $0 to $11,000 | $0 to $11,600 |
| 12% | Over $11,000 to $44,725 | Over $11,600 to $47,150 |
| 22% | Over $44,725 to $95,375 | Over $47,150 to $100,525 |
| 24% | Over $95,375 to $182,100 | Over $100,525 to $191,950 |
| 32% | Over $182,100 to $231,250 | Over $191,150 to $243,725 |
| 35% | Over $231,250 to $346,875 | Over $243,725 to $365,600 |
| 37% | Over $346,875 | Over $365,600 |
Head of Household
| Tax Rate | 2023 Taxable Income | 2024 Taxable Income |
|---|---|---|
| 10% | $0 to $15,700 | $0 to $16,550 |
| 12% | Over $15,700 to $59,850 | Over $16,550 to $63,100 |
| 22% | Over $59,850 to $95,350 | Over $63,100 to $100,500 |
| 24% | Over $95,350 to $182,100 | Over $100,500 to $191,950 |
| 32% | Over $182,100 to $231,250 | Over $191,950 to $243,700 |
| 35% | Over $231,250 to $578,100 | Over $243,700 to $609,350 |
| 37% | Over $578,100 | Over $609,350 |
Tax brackets show the percentage you’ll pay in taxes on each portion of your income. A common misconception is that the highest rate is what you’ll pay on all of your income, but that is incorrect.
Take a single taxpayer who earns $110,000. In 2024, they will take a standard deduction of $14,600, reducing her taxable income to $95,400.
They will pay:
- 10% tax on her first $14,600 of income, or $1,460 in taxes
- 12% tax on income from $14,600 to $47,150 or $5,364
- 22% tax on the portion of income from $47,150 up to $100,525, or $6,765
Total Tax Liability is $13,589. This amount is less than the Tax Liability for 2023 of $15,245.
Retirement Contributions
Contributions to 401k/403b/457/TSP retirement plans increased for 2024. As a result, the maximum contribution for those under 50 will be $23,000 in 2024.
IRA contributions increased to $7000, up from $6500 in 2023.
The maximum contribution for those 50 or older is $30,500 in 2024 because of an additional $7,500 in catch-up contributions.
For 2024, the total contributions — from the employee and your employer — cannot exceed $69,000 or 100% of your compensation, whichever is less. In addition, those over 50 can contribute an additional $7,500 to their retirement plan.
Flexible Spending Accounts
Flexible spending accounts allow workers to put money, up to the limit permitted by the IRS, in an account that can be used to pay for medical expenses. Because the funds are taken from their accounts on a pre-tax basis, it offers tax savings for many workers.
The IRS FSA contribution limit in 2024 is $3,200, an increase from the current tax year’s threshold of $3,050. The maximum carryover for plans that allow it will be $640 in 2024, up from $570 in 2023.
Health Saving Accounts
Those with High-Deductable High Premium Medical Insurance can contribute to a Health Savings Account (HSA) and invest the funds, which enables the money in the HSA to grow tax-free. The IRS sets annual limits on the amount you can contribute to an HSA, which change periodically. Here are the maximum amounts you can contribute to an HSA in 2023:
- For self-only coverage, contribution limits are $4,150 ($3,850 for 2023).
- For family coverage, contribution limits are $8,300 ($7,750 for 2023).
Earned Income Tax Credit
The Earned Income Tax Credit amount are as follows for 2024. The table displays the maximum income limits to qualify for the EITC.
| Children or Relatives Claimed | Earned Income Credit | Filing as Single, Head of Household, or Widowed (2024) | Filing as Married Filing Jointly (2024) |
|---|---|---|---|
| Zero | $632 | $18,591 | $25,511 |
| One | $4,213 | $49,084 | $56,004 |
| Two | $6,960 | $55,768 | $62,688 |
| Three or more | $7,830 | $59,899 | $66,819 |
Child Tax Credit
The Child Tax Credit returned to its pre-pandemic level of $2,000 in 2023. This amount is $1700 in 2024 unless Congress changes before the year’s end.
Estate Tax Credit
The IRS will exempt up to $13.61 million from the estate tax, up from $12.92 million for people who died in 2023 — an increase of 5.3%.
Gift Exclusion
People can also give up to $18,000 in gifts in 2024 without paying taxes on the money, up from $17,000 in 2023.
How can we help?
Time Equipment Company’s integrated payroll system helps your organization become more efficient, improve productivity, and increase retention, all while staying compliant. For more information, contact Time Equipment Company at sales@timeequipment.com or 800-997-8463.
*This information simplifies complex Acts as it is understood by Time Equipment Company. It is not to be taken as legal advice. The regulations for this program are changing. For further information about the American Rescue Plan Act, please visit www.irs.gov.
