Tax Changes Accounting Firms Should Know for 2024 and Beyond

The tax code never stands still. And to keep clients coming back to your accounting firm, your team must stay up to speed with all the recent changes.

To help your staff interpret the changes, we've put together a short summary of the new tax changes for 2024. Plus, we discuss how President Biden's 2025 budget will change taxes in 2024 and beyond and give an explanation of what the expiration of the Tax Cuts and Jobs Act will mean.

2024 tax brackets and standard deduction

Because of high inflation, the adjustment for 2024 is roughly a 5.4% increase. Although this is lower than last year's, it's still relatively high compared with annual increases of the past. This means some people may continue to see a tax benefit this year.

The IRS also increased the standard deduction. It's now $14,600 for singles, up from $13,850 in 2023. Meanwhile, it's increased to $29,200 for married joint filers, up from $27,700.

Higher retirement plan contribution limits

The IRS increased the contribution limits for workplace retirement accounts—401(k), 403(b) and most 457 plans—to a maximum up $23,000 per year, up from $22,500 in 2023. The limit on catch-up contributions for employees who are 50 or older remains $7,500 for 2024.

Employees who are 50 or older can make additional catch-up contributions of up to $7,500.

The Health Savings Account contribution limit (PDF) has increased to $4,150 for individuals and $8,300 for family plans, up from $3,500 and $7,000 in 2019.

The IRS also increased the contribution limit for IRAs to $7,000 per year, but the catch-up contribution limit remains $1,000. Make sure your clients are aware of the new limits, so they can save enough to max out their accounts.

Tax changes for fiscal year 2025

President Biden released his FY 2025 budget in March. It presents higher taxes for American businesses and high earners combined with credits and more complex rules for all taxpayers. Some tax changes will be implemented in 2024.

High-income taxpayers will see the biggest changes. The top tax rate will increase to 39.6% on income above $400,000 for single filers and $450,000 for joint filers. Medicare tax will reach 5% on income above $400,000. And retirement account contributions for high-income taxpayers will be limited, along with several other changes.

In addition, two tax credits offered through the American Rescue Plan Act may be extended. The child tax credit would extend through 2025 and be fully refundable on a permanent basis. And the earned income tax credit would permanently extend the expansion for workers without qualifying children.

How the Tax Cuts and Jobs Act expiration affects your clients

The Tax Cuts and Jobs Act, or TCJA, of 2017 is set to expire at the end of 2025. The TCJA overhauled the individual income tax code, which cut taxes for all income groups. It also widened brackets and doubled the standard deduction.

If Congress doesn't act, most Americans will see a hike in their federal income taxes in 2026. Congress could make the TCJA's individual tax provisions permanent—which would likely lead to economic growth but also add to the federal deficit. Another option is to keep parts of the TCJA while allowing others to expire. Until a decision is made, we won't know exactly how individual taxes will be affected.

Be prepared for changes

Educate your team now on the changes for the 2024 tax year and beyond. By planning ahead and staying up to date, your team can work more confidently and help your clients faster.