IRS Issues Tax Inflation Adjustments and Mileage Rates for 2024

Historically, the IRS makes inflation adjustments to certain federal income tax brackets, credits, and limitations every year. Below is a summary of some of the more significant changes for 2024. For purposes of this article, only amounts that have been adjusted from 2023 to 2024 will be referenced. Items that remained the same will not be shown.

In addition, on December 14, 2023, the IRS published the standard mileage rates for 2024 as follows: 

• 67 cents per mile for business use (up 1.5 cents from 2023.)
• 21 cents per mile for medical or moving purposes for qualified active-duty members of the Armed Forces (a decrease of 1 cent from 2023.)
• 14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2023.

These rates apply to electric and hybrid-electric automobiles as well as gasoline and diesel-powered vehicles.

New in 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 the U.S. for consumption, use, or warehousing. In 2024, this financing rate is being adjusted for inflation. Crude oil or petroleum products entered after December 31, 2016, will now have a tax rate of $0.26 cents per barrel.

Individual Brackets and Rates 

Standard Deduction Amounts 

AMT Exemption Amounts 

Earned Income Tax Credit

The Earned Income Tax Credit amount for tax year 2024 is $7,830 for qualifying taxpayers who have three or more qualifying children, which is a $400 increase from 2023 ($7,430 in 2023).

Qualified Transportation Fringe Benefit & Qualified Parking Monthly Limitation

In 2024, the monthly limitations for the qualified transportation fringe benefit and for qualified parking increases to $315, which is an increase of $15 from 2023.

Contributions to Health Flexible Spending Arrangements & Cafeteria Plan Carryover Maximum

The limitation for employee salary reductions for contributions to health flexible spending arrangements increases to $3,200 in 2024. For any cafeteria plans that allow carryovers of unused amounts, the maximum carryover increases to $640.

Medical Savings Account

Foreign Earned Income Exclusion

The Foreign Earned Income Exclusion increases to $126,500 in 2024, which is a $6,500 increase from 2023.

Estate Basic Exclusion Amount

Estates of decedents who pass away during the 2024 tax year will have a basic exclusion amount of $13,610,000. In 2023, the basic exclusion amount was $12,920,000.

Annual Exclusions for Gifts

In 2024, the annual exclusion for gifts increases to $18,000, a $1,000 increase from 2023.

Adoption Tax Credit

The maximum allowable credit for adoptions in 2024 is the amount of qualified adoption expenses up to $16,810, which is a $860 increase from 2023.

Standard Mileage Rates

Final Thoughts

Though these inflation adjustments are made every year, it is encouraging that the adjustments aren’t as steep as they were in 2023. For example, from 2022 to 2023, the standard deduction for a single individual increased by $900. Whereas, from 2023 to 2024, the deduction only increased by $750. As the annual adjustments are based on the Consumer Price Index for All Urban Consumers (CPI-U), this could possibly be an indicator that the worst of the inflation is behind us.

If you have any questions, please do not hesitate to contact your Herbein representative.

Article contributed by Courtney Richey.