As the calendar turns to 2024, the IRS has announced several inflation adjustments that will impact various aspects of the tax code. These adjustments are crucial for taxpayers to comprehend, as they can influence exemptions, credits, and exclusions, shaping the financial landscape for individuals and families. Earlier, we discussed the tax brackets and standard deductions for tax year 2024. In this article, we’ll delve into the IRS inflation adjustments for tax year 2024.
Alternative Minimum Tax (AMT) Exemption
The Alternative Minimum Tax is designed to ensure that high-income individuals, corporations, trusts, and estates pay at least a minimum amount of tax, regardless of deductions. The AMT exemption amount is subject to inflation adjustments, and in 2024, taxpayers will see changes in this critical threshold.
The IRS has increased the AMT exemption for the tax year 2024 to $85,700, up from $81,300 in 2023. This exemption phases out at $609,350. Married couples filing jointly have an AMT exemption amount of $133,300. Phase outs will begin at $1,218,700. These are increases from tax year 2023’s amounts of $126,500 and $1,156,300 respectively. This adjustment aims to prevent middle-income taxpayers from being inadvertently subject to the AMT due to inflation-driven income growth.
Earned Income Tax Credit (EITC)
The Earned Income Tax Credit (EITC) is a refundable tax credit designed to assist low to moderate-income working individuals and families. The maximum EITC amount is determined based on income, filing status, and the number of qualifying children. Each year, the IRS adjusts these amounts accordingly to account for inflation.
For the tax year 2024, the maximum EITC amounts have been increased from $7,430 to $7,830. This adjustment reflects the IRS’s commitment to addressing the changing economic landscape. It helps to ensure that the EITC remains an effective tool in alleviating poverty for working individuals and families.
Gift Tax Exclusion
The gift tax is imposed on the transfer of property by one individual to another, often as part of estate planning. The gift tax exclusion represents the amount of money or property that an individual can give to another person without incurring gift tax. This exclusion is also subject to periodic adjustments to account for inflation.
In 2024, the IRS has adjusted the gift tax exclusion will increase from $17,000 to $18,000 per person per year. This adjustment can affect estate planning strategies, providing individuals with increased flexibility in transferring assets to their heirs.
The Adoption Credit is a tax credit provided to eligible taxpayers who incur qualified adoption expenses. This credit helps ease the financial burden associated with adopting a child and is subject to periodic adjustments.
For the tax year 2024, the IRS has made inflation-related adjustments to the Adoption Credit. The credit is increasing from $15,950 to $16,810. This adjustment recognizes the rising costs associated with adoption and provides meaningful support to families undertaking the adoption process.
Tax Help for Taxpayers in 2024
The adjustments listed in this article are only a handful out of dozens the IRS has published in Revenue Procedure 2023-24 on their website. As taxpayers navigate the ever-evolving landscape of tax regulations, understanding the implications of inflation adjustments is essential. The 2024 IRS inflation adjustments reflect the government’s commitment to maintaining fairness and relevance in the tax system. You should stay informed about these changes and consult with tax professionals to optimize their financial strategies in light of these adjustments. It’s never too early for tax planning. Optima Tax Relief is the nation’s leading tax resolution firm with over a decade of experience helping taxpayers with tough tax situations.
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