Tax Changes in 2024

Tax season is upon us yet again, and while preparing and filing your 2023 taxes is likely top of mind, this is also the time of year to take note of the IRS’s tax changes that are coming in 2024. 

And with the advent of e-filing, it’s becoming increasingly common for Americans to take preparing their tax returns into their own hands. If you’re one of the 65M+ who prepared their own tax return in 2022 and plan to continue doing so, it’s even more important to be aware of these 2024 tax changes coming your way.

Learning about these 2024 tax changes ahead of time can help inform your financial planning throughout the year, helping you to make calculated money moves that optimize your tax situation and minimize your tax liability.

Tax Changes in 2024 to Know

• Income brackets are shifting again: Marginal tax rates get shifted upward across all income levels, increasing slightly by $600 to $11,600 for the 10% rate, and by $31,225 for the upper-most tax rate in the 37% bracket.

• The standard deduction increases to $14,600 for single filers, $29,200 for joint filers, and $21,900 for heads of households.

• Retirement account contribution limits also get a bump: 401(k), 403(b), and most 457 plan limits are rising to $23,000, with the catch-up contribution for those 50+ staying at $7,500. For IRAs, contribution limits get a $500 bump to $7,000 in total and $7,500 including eligible catch-up contributions.

• The total contribution limit on employer-sponsored retirement plans including employer matches is also rising, up from $66,000 in 2023 to $69,000 in 2024, and $76,500 if you’re age 50 or older.

• FSA and HSA contribution limits get a nudge too: FSA limits increase from $3,050 to $3,200, and HSA limits rise to $4,150 for individuals and $8,300 for families. The minimum deductibles for plan eligibility here are also getting a slight increase to $1,600 for individual plans and $3,200 for families in 2024.

• The gift tax goes up too: The annual gift exemption limit per eligible filer is rising, up from $17,000 in 2023 to $18,000 in 2024. This means individuals can now gift up to $18,000 per recipient, and couples can allot $36,000. Remember, you’ll only owe taxes on gifts that exceed the lifetime exemption limit, not the yearly one, which rises to $13.61M in 2024.

• For freelancers and online sellers: Remember in 2022 when the IRS introduced a $600 reporting threshold for those transacting on third-party services like eBay, Upwork, and others, and proceeded to delay the requirement to 2023? Right, well they’ve delayed it again. Instead, they’re now planning to phase in a reported $5,000 limit in 2024. 

How to Use These Tax Changes to Your Advantage

Now that you’re up to speed on the tax code changes coming in 2024, the best way to use that knowledge is to take advantage of those changes. 

Here are a few things you can do

• Maximize your retirement contributions: This opportunity is the same every year, and increased contribution limits across the board are just another reason to take advantage. By maximizing your retirement account contributions, not only will you be saving money on your taxes, but you’re also setting yourself up for your golden years.

• Make sure to get your employer match: The contribution limits applied to your retirement accounts increase significantly when we factor in the employer match. If your employer offers a retirement account contribution match, it’s wise to do everything you can to take advantage of that.

• Take advantage of FSA/HSA limits: If you’re enrolled in a qualifying high-deductible health plan, an HSA or FSA account is your tax-advantaged sidekick here. With higher contribution limits in 2024, the triple-tax advantage of these accounts is further multiplied.

• Use this year to get ahead on your estate planning: While a marginal rise in the annual gift exemption doesn’t change much, it serves as a reminder to get ahead on your estate planning. Remember, the current estate tax exemption period will sunset starting January 1st, 2026 barring any legislative changes, and the lifetime exemption limit will drop back down to 2017 levels, which when adjusted for inflation, is likely about $7M.

• Your paycheck might get slightly larger — use it for good: A subtle but meaningful result of the tax brackets creeping up is the possibility of a slight increase to your paycheck as your withholdings shift as well. If you’re still living on a similar budget, toss that extra money into your retirement account each month and reap the rewards of compound interest for years to come.

• The standard deduction is rising again, and about 86% of taxpayers will be taking it, as they always do. “If you’ve found yourself often on the borderline between being able to itemize and being forced to take the standard deduction, maybe consider bunching some of your charitable donations this year to take advantage of possible itemization — before it rises again in 2025.” — Matt Shapiro, Origin financial planner

• Don’t let the reporting delay impact your bookkeeping: Just because the IRS has delayed its reporting requirements for third-party platforms doesn’t mean we don’t have to report those earnings as income. Failing to keep up with your own transactions and reportable income can result in a lot of chaos and stress down the road, so make sure you’re documenting well regardless.

Conclusion

No matter how much of a personal finance aristocrat you may be, preparing your taxes is a complex undertaking regardless of your experience. For most of us — we’re already busy enough as it is, and the last thing we need is a complicated, time-consuming tax-filing process. 

That’s exactly why we’re introducing tax filing in Origin, powered by Column Tax. With the addition of tax preparation, Origin members can now file taxes in the same place where they manage, track, and invest their money. This is tax filing simplified.

Tax filing comes at no additional cost for existing Origin members and free trial users, no matter your tax situation. Other comparative offers upcharge clients who are in complex tax situations, even just for having capital gains — we don’t. Within Origin, you can navigate every scenario at no extra cost.