Things are changing in the New Year! 

1. Gift Tax Exclusion

The annual exclusion for gifts increases to $18,000 for calendar year 2024, up from $17,000 for calendar year 2023.

2. Estate Tax Exclusion

The estates of decedents who die during 2024 have a basic exclusion amount of $13,610,000, increased from $12,920,000 for estates of decedents who died in 2023.

3. Cafeteria Plans

For taxable years beginning in 2024, the dollar limitation on voluntary employee salary reductions for contributions to health flexible spending arrangements is $3,200.

4. Cafeteria Plan Unused Amount Carryover Maximum

For 2024, if the cafeteria plan permits the carryover of unused amounts, the maximum carryover amount is $640.

5. Medical Savings Account

This is a type of account available to participants in certain high-deductible Medicare plans.

For taxable years beginning in 2024, the term “high deductible health plan” means, for self-only coverage, a health plan that has an annual deductible that is not less than $2,800 and not more than $4,150, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $5,550.

For family coverage, the term “high deductible health plan” means a health plan that has an annual deductible that is not less than $5,550 and not more than $8,350, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $10,200.

6. Qualified Small Employer Health Reimbursement Arrangement

For taxable years beginning in 2024, to qualify as a qualified small employer health reimbursement arrangement, the arrangement must provide that the total amount of payments and reimbursements for any year cannot exceed $6,150.

This amount is $12,450 for family coverage.

7. Earned Income Credit

For tax year 2024, the maximum Earned Income Tax Credit amount is $7,830 for qualifying taxpayers who have three or more qualifying children, up from $7,430 for tax year 2023.

The revenue procedure contains a table providing maximum EITC amount for other categories, income thresholds and phase-outs.

8. Alternative Minimum Tax Exemption

For the Alternative Minimum Tax, the exemption amount for tax year 2024 is $85,700 and begins to phase out at $609,350.

These amounts are $133,300 for married couples filing jointly, for whom the exemption begins to phase out at $1,218,700.

9. Eligible Long-Term Care Premiums

Clients who have high enough medical bills to benefit from itemizing their medical expenses can include at least some of their private long-term care insurance premiums in their medical expense total.

The amounts that can be included in the medial expense total vary by age, and this year they actually increased thanks to a number of factors that include (slightly) lower premiums for long-term care coverage.

Here’s how the 2024 “includible” premium levels compare with the 2023 levels:

• 40 or under: will decrease to $470 from $480.
• More than 40 and up to 50: will drop to $880 from $890.
• More than 50 and up to 60: will fall to $1,760 from $1,790.
• More than 60 and up to 70: will decrease to $4,710 from $4,770.
• 70 and older: will fall to $5,880 from $5,960.

For the Qualified Long-Term Care Insurance Contract or Life Insurance Contract Per Diem Limitation, the dollar limit on the benefits will decrease to $410 per day from $420 per day.

10. Itemized Deductions

For 2024, there is no limitation on itemized deductions, as that limitation was eliminated by the Tax Cuts and Jobs Act, beginning in 2018 and set to sunset at the end of 2025.

11. Tax Rates

For tax year 2024, the top tax rate remains 37% for individual single taxpayers with incomes greater than $609,350 ($731,200 for married couples filing jointly). The other rates are:

• 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).
• The lowest rate is 10% for incomes of single individuals with incomes of $11,600 or less ($23,200 for married couples filing jointly).

12. Personal Exemption

The personal exemption for tax year 2023 remains at zero, as it was for 2022, as it was eliminated in the Tax Cuts and Jobs Act.

13. Standard Deduction

The standard deduction for married couples filing jointly for tax year 2024 rises to 29,200, up from $27,700 for 2023.

For single taxpayers and married individuals filing separately, the standard deduction rises to $14,600 from $13,850 for 2023. For heads of households, the standard deduction will be $21,900, rising from $20,800 for tax year 2023.

About Matt

Matt Ward is a financial advisor and the president of New Century Investments, an independent investment advisory firm serving business owners, pre-retirees, and retirees in the Dallas-Fort Worth area and beyond. Matt is passionate about integrating investing, planning, and tax management into a holistic approach. Matt’s breadth of knowledge and experience in both taxes and investment management sets him apart, giving him the ability to design, advise on, and manage business strategies, tax efficiency, and retirement planning. He is known for his care and attention to detail and works hard to develop personal relationships with each of his clients so they can benefit from his customized service and guidance. He loves walking with his clients through their financial journey, supporting them and celebrating with them as they reach their goals.

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