The IRS announced Nov. 9 annual inflation adjustments for more than 60 tax provisions that will apply for the tax year 2024.
One adjustment that will be of particular interest to financial advisors with ultra-high-net-worth clients is the lifetime estate-tax and gift-tax exemption. Estates of decedents who die during 2024 have a basic lifetime exclusion amount of $13.61 million, up from $12.92 million for estates of decedents who died in 2023.
The exemption will likely go up again for the 2025 tax year but could drop dramatically for 2026. The 2017 Tax Cuts and Jobs Act doubled the lifetime estate and gift tax exemption amount from $5.6 million to $11.18 million for individuals, indexed for inflation after 2018. This “bonus” exemption will disappear beginning January 1, 2026, with the total exemption being reduced to $5 million, adjusted for inflation, unless Congress extends provisions in the 2017 act.
The IRS also announced that the annual exclusion for gifts increases to $18,000 for calendar year 2024, up from $17,000 for 2023.
Meanwhile, the standard deduction for married couples filing jointly is rising to $29,200, an increase of $1,500. For single taxpayers and married individuals filing separately, the standard deduction rises to $14,600 for 2024, an increase of $750; and for heads of households, the standard deduction will be $21,900, up $1,100.
The top marginal tax rate for 2024 remains 37% for individual single taxpayers with incomes greater than $609,350 ($731,200 for married couples filing jointly). The other rates are:
• 35% for incomes over $243,725 ($487,450 for married couples filing jointly).
• 32% for incomes over $191,950 ($383,900 for married couples filing jointly).
• 24% for incomes over $100,525 ($201,050 for married couples filing jointly).
• 22% for incomes over $47,150 ($94,300 for married couples filing jointly).
• 12% for incomes over $11,600 ($23,200 for married couples filing jointly).
The lowest rate is 10% for incomes of single individuals with incomes of $11,600 or less ($23,200 for married couples filing jointly).
Alternative Minimum Tax
The alternative minimum tax exemption for 2024 is $85,700 and begins to phase out at $609,350. The exemption is $133,300 for married couples filing jointly, with their exemption beginning to phase out at $1,218,700. For comparison, the 2023 exemption amount was $81,300 and began to phase out at $578,150 ($126,500 for married couples filing jointly for whom the exemption began to phase out at $1,156,300).
For more information on the 2024 tax rate tables, click here.