Happy New Year, and welcome to another round of new rules and key numbers to help make sense of things. Here is a list of 2024 changes to Medicare, Social Security, retirement accounts and tax brackets. No one will be affected by all of them, but nearly everyone will be affected by some of them.
Medicare
For most Medicare beneficiaries, the Part B monthly premium will rise to $174.70 in 2024, an increase of $9.80, or 6% from 2023. The annual Part B deductible, which most people must pay before their Medicare coverage begins, will rise by $14, or 6.2%, to $240 from $226. Part B coverage includes doctors, medical equipment and outpatient expenses.
The deductible for Part A will rise 2% to $1,632 in 2024 from $1,600 this year. Two-percent increases will also be applied to coinsurance programs for care in hospitals and skilled nursing homes.
High-income Medicare surcharges, which apply additional premiums for Part B and Part D drug plans for about 8% of the highest-earning Medicare enrollees, will increase about 6%.
The maximum deductible for Part D drug plans will rise to $545 from $505; plans are able to set lower deductibles. Medicare beneficiaries pay 25% of drug costs once insurance takes effect and continue to pay this percentage until out-of-pocket expenses have reached $8,000, up from $7,400 in 2023. This includes their expenses and the value of manufacturer discounts on branded drugs.
The Inflation Reduction Act eliminates the catastrophic zone of Part D plans in 2024, thus ending consumer co-pays for drugs once the $8,000 threshold has been reached.
In 2025, the law will cap consumer drug costs at $2,000. It will also impose penalties on drug makers who raise prices by more than the rate of general consumer inflation. The law also authorized Medicare to being negotiating prices with manufacturers for a small list of drugs; some of these prices will be announced this year.
Social Security
The Social Security cost-of-living adjustment (COLA) increases 2024 benefits by 3.2%. The average monthly benefit will rise by $59 next year, to $1,907 from $1,848. The ceiling on earnings subject to payroll taxes will rise to $168,600 from $160,200 in 2023. Other important changes linked to the COLA are explained here (pdf).
Retirement accounts
Eligible individuals can contribute up to $23,000 to their 401(k) plans in 2024, up from $22,500 in 2023. The limit on annual contributions to an IRA increased to $7,000, up from $6,500. The IRA catch‑up contribution limit for eligible individuals aged 50 and over was amended under the SECURE 2.0 Act of 2022 (SECURE 2.0) to include an annual cost‑of‑living adjustment. It remains $1,000 for 2024 but will rise in future years.
Roth IRA income limits for eligible contributions are between $146,000 and $161,000 for singles and heads of household, up from between $138,000 and $153,000 in 2023. For married couples filing jointly, the income phase-out range is increased to between $230,000 and $240,000, up from between $218,000 and $228,000. Further details can be downloaded here (pdf) from the IRS.
Taxes
Here are IRS details on inflation-related changes in deductions and tax brackets.
The standard deduction for married couples filing jointly is $27,700 for tax year 2023 and will rise to $29,200 for tax year 2024. For single taxpayers and married individuals filing separately, the standard deduction is half these amounts: $13,850 for 2023 returns and $14,600 for the 2024 tax year. For heads of households, the standard deduction is $20,800 in 2023 and $21,900 for tax year 2024.
Here are the tax brackets for tax year 2024:
- 37% for individual single taxpayers with incomes greater than $609,350 ($731,200 for married couples filing jointly)
- 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)
- 10% for incomes of single individuals with incomes of $11,600 or less ($23,200 for married couples filing jointly)
The Alternative Minimum Tax (AMT) exemption amount for tax year 2024 is $85,700 and begins to phase out at $609,350 ($133,300 for married couples filing jointly for whom the exemption begins to phase out at $1,218,700). For comparison, the 2023 exemption amount was $81,300 and began to phase out at $578,150 ($126,500 for married couples filing jointly for whom the exemption began to phase out at $1,156,300).