The Internal Revenue Service has unveiled Revenue Procedure 2023-34, a version of a guide that updates dozens of the numbers that will be used to calculate clients' 2024 income taxes.
The guide provides parameters for all sorts of tax provisions that need to be adjusted for inflation, including basics such as the standard deduction and the top tax rate.
Here are 10 items from the guide that could affect tax calculations involving life insurance, health insurance or long-term care insurance.
Numbers for Life Insurance and Estate Planning
1. Unified Credit Against Estate Tax
The credit will increase to $13.61 million for a decedent dying in 2024, from $12.92 million for a decedent dying in 2023.
2. Gift Tax Exclusion
The exclusion for 2024 will be $18,000 for gifts to any person, and $185,000 for gifts to a spouse who is not a citizen of the United States. That compares with 2023 limits of $17,000 for gifts to any person, and $175,000 for gifts to a non-U.S. citizen spouse.
3. Valuation of Qualified Real Property in a Decedent's Gross Estate
If a property owner dies in 2024, and the executor of the estate chooses to use a special valuation method for real estate, that approach can reduce the value of the property by a maximum of $1.39 million. For a property owner who dies this year, the maximum impact of that approach is $1.31 million.
4. Estate and Trust Income Tax Rates
The cutoff for the maximum rate is $15,200, and the amount owed on the portion over the cutoff is 37% of the excess plus $3,659.50.
For 2023, the cutoff for the maximum rate is $14,450, and the amount owed is 37% of the excess plus $3,491.
Numbers for Health Insurance and Benefits
5. Cafeteria plans
The dollar limit for voluntary employee salary reductions for contributions to health flexible spending arrangements (FSAs) will increase to $3,200, from $3,050. The maximum amount of unused value that can be carried over to the next year will increase to $640, from $610.
6. Medical Savings Accounts
The MSA is the ancestor of the HSA and a sibling of the health reimbursement arrangement.
An MSA holder must combine high-deductible health coverage with a special savings account.
