Rev. Proc. 2023-34: Inflation adjustments for 2024, individual taxpayers

The IRS today released an advance version of Rev. Proc. 2023-34 providing the annual inflation adjustments for more than 60 tax provisions to be used by individual taxpayers on their 2024 returns (that is, the returns that are generally filed in 2025).

Today’s revenue procedure also includes inflation adjustments of interest to exempt organizations (discussed at the end of this report).

Read Rev. Proc. 2023-34 [PDF 266 KB]

Starting in calendar year 2023, the “Inflation Reduction Act” reinstated the Hazardous Substance Superfund financing rate for crude oil received at U.S. refineries, and petroleum products that entered into the United States for consumption, use or warehousing. The tax rate is the sum of the Hazardous Substance Superfund rate and the Oil Spill Liability Trust Fund financing rate. For calendar years beginning in 2024, the Hazardous Substance Superfund financing rate is adjusted for inflation. For calendar year 2024 crude oil or petroleum products entered after December 31, 2016, will have a tax rate of $0.26 cents a barrel. 

Tax rates for individual taxpayers, adjusted for inflation

With the inflation adjustment, Rev. Proc. 2023-34 provides that for tax year 2024:

• The top income tax rate remains 37% for individual single taxpayers with incomes greater than $609,350 ($731,200 for married couples filing jointly).
• The other income tax rates for single taxpayers will be:
  • 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% of incomes for single individuals with incomes of $11,600 or less ($23,200 for married couples filing jointly).

The standard deduction amounts for 2024 will be increased, as follows:

• For married couples filing jointly—$29,200 [an increase of $1,500 from the prior year]
• For single taxpayers and married individuals filing separately—$14,600 [an increase of $750]
• For heads of households—$21,900 [an increase of $1,100]

The personal exemption for tax year 2024 remains at $0 (the personal exemption was suspended for tax years 2018 through 2025 by the U.S. tax law enacted in 2017 (Pub. L. No. 115-97, or the law that is often referred to as the “Tax Cuts and Jobs Act” (TCJA)).

For 2024, as in 2023, 2022, 2021, 2020, 2019 and 2018, there is no limitation on itemized deductions (referred to as the “Pease” limitation under prior law), because that limitation was also suspended by the TCJA for years 2018-2025.

• An individual is a covered expatriate if the individual’s “average annual net income tax” for the five tax years ending before the expatriation date is more than $201,000.
• The amount that would be includible in the gross income of a covered expatriate is reduced (but not below zero) by $866,000.
• The foreign earned income exclusion for 2023 is $126,500 [up from $120,000 for tax year 2023].
• The first $185,000 of gifts to a spouse who is not a citizen of the United States (other than gifts of future interests in property) are not included in the total amount of taxable gifts made during that year.

• The alternative minimum tax (AMT) exemption amount is increased* for tax year 2024 to $85,700 and begins to phase out at $609,350 ($133,300 for married couples filing jointly, and the exemption begins to phase out at $1,218,700).
• The maximum earned income tax credit amount for 2024 is $7,830 [up from $7,430 for 2023] for qualifying taxpayers who have three or more qualifying children.
• The qualified transportation fringe benefit for tax year 2024 will have a monthly limitation of $315 for certain commuter transportation, transit passes, and qualified parking [up from $300 for 2023].
• The modified adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit is not adjusted for inflation for tax years beginning after December 31, 2020. The Lifetime Learning Credit is phased out for taxpayers with modified adjusted gross income in excess of $80,000 ($160,000 for joint returns).
• The maximum credit allowed for adoptions is the amount of qualified adoption expenses up to $16,810 [up from $15,950 for 2023].

• The lifetime exemption amount for transfers during 2024 is $13,610,000 [up from $12,920,000 for transfers in 2023].

• The annual exclusion for gifts is $18,000 for calendar year 2024 [up from $17,000 for 2023].

• The dollar limitation for employee salary reductions for contributions to health flexible spending arrangements (FSA) for tax years beginning in 2024 is $3,200 [up $150 from 2023]. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount is $640 [up $30 from 2023].
• Concerning medical savings accounts (MSAs), for tax year 2024, participants who have self-only coverage in an MSA, the plan must have an annual deductible that is not less than $2,800 [up $150 from tax year 2023], but not more than $4,150 [up $200 from 2023].
  • For self-only coverage, the maximum out-of-pocket expense amount is $5,550 [up $250 from 2023].
  • Participants with family coverage for 2024, the annual deductible is not less than $5,550 [up $200 from 2023]; however, the deductible cannot be more than $8,350 [up $450 from the limit for 2023].
  • For family coverage, the out-of-pocket expense limit is $10,200 [up $550 from 2023].

Read a related IRS release—IR 2023-208 (November 9, 2023)

• Dues required to be paid to be a member of an agricultural or horticultural organization described in section 501(c)(5) will be treated as not derived from an unrelated trade or business if they do not exceed $201.
• For purposes of defining the term “unrelated trade or business,” the unrelated business income of certain exempt organizations will not include a “low cost article” of $13.20 or less.
• The $5, $25, and $50 guidelines for disregarding insubstantial benefits received by a donor in return for a fully deductible charitable contribution under section 170, as set forth in Rev. Proc. 90-12 (as amplified by Rev. Proc. 92-49, and modified by Rev. Proc. 92-102) will be $13.20, $66.00, and $132, respectively.
• For tax years beginning in 2023, the annual per person, family, or entity limitation to qualify for the reporting exception for nondeductible lobbying expenses under section 6033(e)(3) will be $140 or less.
• Rev. Proc. 2023-34 provides the daily and maximum penalty amounts for returns required to be filed in 2025, including for failure to file a return required under section 6033(a)(1) (relating to returns by exempt organizations) or section 6012(a)(6) (relating to returns by political organizations).