Based off the recent adjustments from the U.S. Bureau of Labor Statistic’s release of the consumer price index, it is predicted that the inflation-adjusted amounts in the Tax Code will increase 5.4% in 2024. While that’s a slight decrease from the 7.1% increase this year, it is in fact almost double the 3% increase we had previously in year 2022. Taking that into account, for the second year in a row, record high U.S. inflation has contributed to the significant increase in inflation-adjusted amounts in the tax code. A recent annual Projected U.S. Tax Rates report computed on behalf of Bloomberg Tax & Accounting provides early insight of the potential tax savings that could be possible due to an increase in deduction limitations, upward adjustments of tax brackets, and increases to numerous other key thresholds. It ultimately acts as an advance notice that outlines a number of projections, including penalty amounts for failure to file, retirement planning figures, as well as income threshold, deduction and exemption amounts.
Additionally, the report factors in adjustments for tax changes made under last year’s Inflation Reduction Act as well as the Secure 2.0 Act. Specifically in regards to the Inflation Reduction Act, changes included an increase in the Section 4611(c) hazardous substance superfund financing rate and also an increase in the Section 179D deduction for energy-efficient commercial building property as long as new wage and apprenticeship requirements are met. Additional changes, referencing the Secure 2.0 Act, 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.
It is suggested that we should anticipate significant year-after-year increases in some deductions. Notably, in regards to the foreign earned income exclusion increasing to $126,500 (from $120,000) and the annual exclusion for gifts increasing to $18,000 (from $17,000). This will enable taxpayers to up their “gift giving” without worrying about possible tax implications.
The intent of this report is to provide actionable projections for the upcoming year, based off the recently released consumer price index from the U.S. Bureau of Labor Statistics. This report acts as guidance for many tax professionals and taxpayers so they can start making arrangements for the upcoming year ahead of the official IRS announcement, which is expected to drop later this year.