Money Management

We’re weeks away from the opening of the 2023 tax season, but the IRS has already released news about changes for 2024. Here’s what we know. 

Although the new year has yet to arrive, the IRS has been busy making decisions about 2024 taxes. Each year, we’re met with tax changes, and 2024 is no different. Here’s what we know so far about the most recent changes.

1. Tax brackets are changing

The IRS has announced that there will be a 5.4% bump in income thresholds to reach each new tax bracket. To determine tax brackets, the IRS uses a formula based on the Consumer Price Index. The CPI tracks typical goods and services purchased by consumers and provides a clear picture of what’s going on with inflation. When inflation is high, tax brackets receive a larger boost. When inflation cools, the boost is more moderate.

Marginal tax brackets for 2024 are as follows:

Single filers

Joint filers

2. Standard deductions will increase

Most Americans (86%, in fact) take the standard deduction instead of itemizing their deductions at tax time. The amount we’ll be able to deduct in 2024 is increasing. Here are the increases we can expect:

3. The Alternative Minimum Tax (AMT) exemption will be higher

Under tax law, “average” taxpayers receive tax breaks that can significantly reduce the amount of income tax they must pay. To help ensure that all taxpayers pay their fair share, high-income earners are subject to the alternative minimum tax. Due to AMT, wealthy taxpayers must drop certain deductions available to average taxpayers and add back some sources of income. Once the math is done and the taxpayer is left with a total, they get to deduct the AMT exemption.

In 2023, the AMT exemption amount was $81,300 and began to phase out at $578,150. For 2024, the AMT exemption amount is $85,700 and begins to phase out at $609,350. For married couples filing jointly, the AMT exemption amount will be $133,300, beginning to phase out at $1,218,700.

4. The Earned Income Tax Credit (EITC) has been boosted

Qualifying taxpayers with three or more qualifying children will see the EITC increase from $7,430 to $7,830. The EITC is a federal tax credit for low- to moderate-income taxpayers, particularly those with children. Boosting that credit gives parents a little more money each year to cover household obligations.

5. Monthly limitation for the qualified transportation fringe benefit increasing by $15

The monthly limitation for the qualified transportation fringe benefit and the monthly limitation for qualified parking increases from $300 to $315 for 2024. IRS code allows employers to offer these nontaxable fringe benefits to employees, or employees can pay for the benefits tax free on their own by working out a salary reduction agreement with their employer. In either case, it gives employees a lower-cost way to get to work.

6. Change in allowable FSA contributions

For tax year 2024, employees can contribute up to $3,200 to health flexible spending arrangements. The maximum carryover for cafeteria plans that permit carryover is increasing by $30 to $640. That’s more money to tuck away in your savings account for an emergency health situation.

7. Foreign earned income exclusion increase

There will also be an increase in the foreign-earned income exclusion. The new exclusion is $126,500, up $6,500 from 2023. In short, U.S. citizens working outside the U.S. can reduce their tax bill by excluding an additional $6,500 from income earned in other countries.

8. Beneficiaries can exclude more

Beneficiaries will be able to exclude $13,610,000 of the decedent’s estate, up from $12,920,000 in 2023. While receiving part of a multi-million dollar estate is not the norm for most of us, this tax change helps the wealthy preserve more of their money for the family, friends, and charitable organizations it’s left to upon their death.

9. Annual exclusion for gifts is getting a bump

In 2024, the new annual exclusion for gifts is increasing to $18,000, an increase of $1,000 from 2023. The annual exclusion for gifts refers to the amount of money one person can “gift” another without being hit with a gift tax. Typically, the gift giver is responsible for paying the tax bill, which makes this change welcome news to those who would like to share a bit more of their money.

10. Adoption credits are on the rise

The maximum allowable adoption credit for 2024 is ratcheting up to $16,800. The adoption credit is designed to help offset the high costs associated with adopting a child. In addition to court costs and attorney fees, the credit can be applied to travel expenses and any other expense directly related to a legal adoption.

Tax changes may not be the most exciting thing you read about today, but they can come in handy. If nothing else, they serve as a reminder of the many ways to put more money in your checking account at tax time.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Citigroup is an advertising partner of The Ascent, a Motley Fool company. Dana George has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Don’t overpay for gasoline on your holiday road trip. Comparing gas prices and choosing the cheapest place to fuel up is wise. Find out how. 

You’re not alone if you’ll be taking a road trip to visit friends and family during the busy holiday season. According to data from AAA, nearly 113 million people were expected to travel 50 miles or more from Dec. 23 to Jan. 2 last year. Millions of people will likely be traveling this holiday season, too. As you prepare for your upcoming travels, don’t forget to budget for extra costs like tolls and gasoline. Here are a few suggestions to help you find the cheapest gas while on your journey.

GasBuddy

One way to save money on gasoline is by using GasBuddy. This website and free mobile app allow travelers to research gas prices. You’ll see nearby gas stations and the per-gallon price at each place, so you can quickly compare and choose a convenient and affordable gas station to fuel up.

You can also use the trip cost calculator to estimate your fuel costs before you leave so you know how much money to include in your vacation budget for this expense.

Google Maps

Another way to find the cheapest gas during your road trip is to use Google Maps. Many travelers use this app for GPS driving directions, but you can also use it to find nearby gas stations, rest stops, restaurants, grocery stores, and more. The app even allows you to research gas prices at nearby gas stations to avoid overpaying at the pump.

To access this feature, open the app and click the “Gas” button under the search bar. You’ll see nearby gas stations and the per-gallon price for each. Once you find the gas station you want to visit, select it and click “Directions” to get driving directions. If you’re already used to using Google Maps while on road trips, this offers an easy way to compare gas prices.

Don’t forget to use your warehouse club membership perks

Many people join warehouse clubs to save money on groceries and gas. If you have a Sam’s Club or Costco membership, you can check for a club location along your driving route. By fueling up there, you may be able to keep more money in your bank account.

Review your desired route before you depart so you know what to expect. Don’t forget to put your membership card in your wallet. If there isn’t a club location along your driving route, you may want to research other gas station prices to avoid wasting time and gasoline.

Earn rewards on your fuel up

Comparing prices and choosing a more affordable place to stop for fuel can help you save money on travel expenses. But you can also earn rewards when you fill up your tank.

Consider using one of the best rewards credit cards when you stop to buy gas. You can earn points or miles when you charge gas purchases on this type of credit card.

You won’t get a direct discount when you fuel up, but earning valuable rewards can be a win for your personal finances. If you prefer to earn cash back rewards instead, review our list of the best cash back credit cards. Safe travels and happy holidays!

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Costco Wholesale. The Motley Fool has a disclosure policy.

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Think “buy now, pay later” is the way to go? Keep reading to see why using this payment option might backfire on you. 

It’s the time of the year when a lot of people are reaching deeper into their wallets to pay for holiday purchases. And if you’d prefer to spread out some of those payments over time, then a “buy now, pay later” plan, or BNPL plan, might seem like a good option for you.

BNPL plans allow you to pay for purchases over a short time frame — usually 12 weeks or less. If you make your payments on time, there’s generally no cost to using one of these agreements; whereas with a credit card, if you carry a balance forward, you’ll generally be looking at interest charges.

Data from Adobe Analytics found that short-term installment loans like BNPL plans led to $6.4 billion of online spending in October. Adobe also estimates that 20% of U.S. consumers intend to use BNPL plans to pay for holiday gifts.

But if you’re going to sign up for a BNPL plan, proceed with caution. Otherwise, you could end up facing some very unfavorable consequences.

When you fall behind on your BNPL plan

Failing to keep up with a BNPL plan could hurt you in several ways. First, you could face interest and penalties on the sum you’ve borrowed. Secondly, your credit score could take a big hit if delinquent activity on your part is reported to the credit bureaus. And from there, a host of repercussions could ensue.

The lower your credit score is, the harder it becomes to qualify for a personal loan, mortgage, or car loan. And even if you do manage to get approved for one, you may be looking at a higher interest rate that costs you more money over time.

A lower credit score could also make it harder for you to rent a home. Landlords commonly perform credit checks on tenants to make sure they have a solid payment history. A hit to your credit score could cause a landlord to decide they don’t want to take a chance on you.

Your best bet is to stick to cash

BNPL plans might seem convenient. But whether you’re signing up for one in the context of holiday gifts or another purpose, you should know that your best bet is generally to pay for your purchases in cash.

Another option? Go ahead and swipe your credit card for the points — but make sure you have the cash on hand to pay for your purchase. That way, you’re able to pay off your balance without having to carry a portion of it forward.

In fact, the only time it really makes sense to use a BNPL plan is if you have to make a purchase in a pinch and don’t have the cash. If your laptop breaks and you can’t afford to buy a new one outright, but you’re self-employed and you also can’t work without a laptop, then that’s a purchase it could pay to finance with a BNPL plan. You’re still taking a risk in that situation, but it’s an understandable one because you basically have no choice.

But don’t use a BNPL plan to pay for expenses that aren’t an emergency. These include holiday gifts, electronics for non-work purposes, and entertainment. Falling behind on a BNPL plan could cause serious damage to your credit score. And from there, the consequences have the potential to linger for a really long time.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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