How the 2024 cost-of-living adjustment numbers affect your year-end tax planning – part one

2024 cost-of-living adjustmentThe IRS released the 2024 cost-of-living adjustment numbers for over 60 tax provisions recently. Though not as much as in the previous year, several amounts will grow over 2023 as inflation moderates slightly this year compared to last. Remember to account for these 2024 modifications when you apply your 2023 year-end tax preparation techniques.

Remember that the chained consumer price index, or C-CPI-U, is used to compute annual inflation adjustments under the Tax Cuts and Jobs Act (TCJA). Compared to the prior use of the consumer price index, this results in a slower rate of increase in tax bracket thresholds, the standard deduction, some exemptions, and other statistics. This could eventually push taxpayers into higher tax brackets and reduce the value of different deductions. The C-CPI-U was incorporated into the TCJA permanently.

Individual income taxes

Because tax bracket thresholds are based on percentages, they rise more dramatically for higher brackets. However, thresholds grow for all filing statuses. For instance, depending on filing status, the top of the 10% bracket may increase by $600–1,200, whereas the top of the 35% bracket may increase by $18,725–$37,450.

2024 ordinary-income tax brackets
Tax rate Single Head of household Married filing jointly or surviving spouse Married filing separately
10%            $0 –   $11,600            $0 –   $16,550           $0 –   $23,200            $0 –   $11,600
12%   $11,601 –   $47,150   $16,551 –   $63,100   $23,201 –   $94,300   $11,601 –   $47,150
22%   $47,151 – $100,525   $63,101 – $100,500   $94,301 – $201,050   $47,151 – $100,525
24% $100,526 – $191,950 $100,501 – $191,950 $201,051 – $383,900 $100,526 – $191,950
32% $191,951 – $243,725 $191,951 – $243,700 $383,901 – $487,450 $191,951 – $243,725
35% $243,726 – $609,350 $243,701 – $609,350 $487,451 – $731,200 $243,726 – $365,600
37%          Over $609,350          Over $609,350          Over $731,200          Over $365,600

Personal exemptions were put on hold under the TCJA until 2025. But through 2025, it almost doubled the standard deduction, which is yearly adjusted for inflation. So, the standard deduction in 2024 will be $21,900 for heads of household, $29,200 for married couples filing jointly, and $14,600 for singles and married couples filing separately. Unless Congress extends or amends the current rules, the standard deduction amounts are set to revert to those under the pre-TCJA statute after 2025.

In addition, certain taxpayers may be able to offset the loss of their personal exemptions with changes to the standard deduction. However, taxpayers, who usually itemize deductions, might not benefit from them.


A unique tax system, which you may know as the alternative minimum tax (AMT), restricts some deductions, forbids others, and handles some income differently. You are required to pay the AMT if it exceeds your usual tax obligation.

The AMT tax brackets are indexed for inflation annually, similarly to the ordinary ones. The 28% bracket threshold will now rise by $11,900 in 2024 for all filing statuses. However, married individuals filing separately would see a rise of only half that amount.

2024 AMT brackets
Tax rate Single Head of household Married filing jointly or surviving spouse Married filing separately
26%       $0 – $232,600       $0 – $232,600       $0 – $232,600       $0 – $116,300
28%      Over $232,600      Over $232,600      Over $232,600      Over $116,300

Additionally indexed are the exemption phaseouts and AMT exemptions. The exemption amounts for individuals and joint filers in 2024 are $85,700 and $133,300, respectively, rising by $4,400 and $6,800 over 2023. Then, in 2024, the inflation-adjusted phaseout ranges for single filers will be $609,350–$952,150, and for joint filers, $1,218,700–$1,751,900. Meanwhile, married couples filing separately will get half the amount paid to joint filers.

2024 cost-of-living adjustment and tax planning

You might have the chance to receive some tax relief next year because many of the 2024 cost-of-living adjustment levels are moving upward. Furthermore, you might be able to increase your retirement savings because of specific constraints associated with retirement plans that are also growing, which you can see in the second part of this two-part blog series. Please contact our RRBB advisors if you have any questions about the most effective tax-saving tactics in light of the 2024 figures. We would be glad to assist.

© 2023


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