Inflation-adjusted amounts in the Tax Code are predicted to increase 5.4% in 2024, according to a new report from Bloomberg Tax.
While that’s a slight decrease from the 7.1% increase this year, it’s close to double the 2022 increase of 3%. Bloomberg Tax released the report Wednesday after the U.S. Bureau of Labor Statistics issued its most recent consumer price index, which rose 0.6% in August after increasing 0.2% in July.
The report anticipates significant year-over-year increases in some deductions, with the foreign earned income exclusion going from $120,000 to $126,500, and the annual exclusion for gifts growing from $17,000 to $18,000, enabling taxpayers to up their gifts without worrying about tax implications.
The Blomberg report takes into account the tax changes made under last year’s Inflation Reduction Act and the SECURE 2.0 Act. For the Inflation Reduction Act, changes include an increase in the Section 4611(c) hazardous substance superfund financing rate and a bump up in the Section 179D deduction for energy-efficient commercial building property as long as new wage and apprenticeship requirements are met. For the SECURE 2.0 Act, changes include an increase in the wage limitation amount for the additional Section 45E credit for small employer pension plan startup costs from $100,000 to $140,000.
“For the second year in a row, high U.S. inflation has contributed to a significant increase in inflation-adjusted amounts in the tax code,” said Heather Rothman, vice president of analysis and content at Bloomberg Tax & Accounting, in a statement. “Once again, our annual report provides actionable projections for tax professionals and taxpayers to begin planning for the upcoming year ahead of the official IRS announcement.”
Other major adjustments, comparing the 2023 amounts and 2024 projections, include:
Individual income tax rate brackets
Standard deduction
Alternative minimum tax
