Top 2024 income and sales tax changes in the US
by February 21, 2024
Sales tax rules, rates, and compliance processes are dictated by each state, and are subject to change based on individual state government legislation. However, sales tax isn’t the only tax type that sees changes. The IRS announces federal income tax changes as well, and we’re highlighting a few of those updates going into effect in 2024, in addition to some sales tax changes for businesses to be aware of.
Standard deduction increased
The IRS often makes inflation adjustments, and this year is no different. For the 2024 tax year, the IRS has announced an increase in the standard deduction amount. For married couples filing jointly, the standard deduction is now $29,200, an increase of $1,500 from 2023. For single taxpayers and married individuals filing separately, the standard deduction is $14,600, an increase of $750. Finally, for the heads of households, the standard deduction is $21,900, an increase of $1,100. If you are new to standard deductions, the IRS has more information listed on their website.
14 states decrease income tax rates
Many states found themselves with a revenue surplus as a result of the COVID-19 pandemic, and have decreased their income tax rate accordingly. According to the Tax Foundation, taxpayers in 14 states will be lucky enough to pay less income tax in 2024. These states include Arkansas, Connecticut, Georgia, Indiana, Iowa, Kentucky, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North Carolina, Ohio, and South Carolina. On the other hand, taxpayers in Michigan will see an increased income tax rate of 4.25%, up from 4.05% in 2023.
IRA and 401(k) limits have increased
In the US, individual retirement accounts, like a 401(k) or an IRA, have contribution limits in place to prevent high earners from benefiting more than the average worker. However, these limits are also subject to change based on inflation amounts. The IRS has announced a change that could impact individuals looking to contribute more to their retirement accounts in 2024. The contribution limit for employees who participate in 401(k), 403(b), and most 457 plans has increased to $23,000 from $22,500. Additionally, the limit on annual contributions to an IRA for individuals increased to $7,000, up from $6,500.
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Get startedChanges in existing sales tax legislation
Two states, Louisiana and South Dakota, removed the 200 transaction requirement from the economic nexus threshold, and only require businesses that exceed the revenue threshold in those states to register to collect sales tax. If your business no longer meets economic nexus in these states as a result of this change, we encourage you to reach out to the state and determine if you are still required to collect sales tax. Additionally, states are continuing to examine how software and digital services are taxed as these types of goods and services increase. Looking for more information on 2024 sales tax changes? Check out this recent blog post.
How to manage your tax compliance No matter the tax type, compliance can be challenging. For many businesses and individuals, managing tax requirements might require assistance. We encourage you to reach out to a tax professional that specializes in the specific tax type guidance. For sales tax support, we’ve highlighted a few important questions to ask when hiring a sales tax accountant here. For help with income tax questions, the IRS has a great resource to find the right tax professional for you.
