The start of 2024 brings financial changes for employers and employees nationwide, including Internal Revenue Service (IRS) adjustments and minimum wage increases.  

The IRS recently announced annual inflation adjustments for 2024, which could mean business owners and employees paying less taxes on their 2025 tax return. 

The IRS adjusts annually for inflation to prevent what is called “bracket creep,” according to the Tax Foundation. 

“Bracket creep occurs when inflation, rather than real increases in income, pushes people into higher income tax brackets or reduces the value they receive from credits and deductions,” a Tax Foundation article said. 

The IRS uses the Chained Consumer Price Index (C-CPI) to measure inflation, according to the article. 

The standard deduction for married couples filing jointly increased by $1,500 to $29,200 from tax year 2023, an IRS release said. The deduction for single taxpayers and married individuals filing separately increased by $750 to $14,600. The head of household deduction increased by $1,100 to $21,900. 

The tax rates for tax year 2024 are: 

• • 37% for incomes over $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 less than $11,600 ($23,200 for married couples filing jointly)

Multiple tax credits will also be adjusted, including the Alternative Minimum Tax and Earned Income Tax Credit. View all the changes here. 

Employers could potentially save additional money with pre-tax contributions to 401(k)s and through offering 401(k) solutions.

The IRS also recently announced an increase in the amount individuals can contribute to their 401(k), 403(b), most 457, and Thrift Savings plans in 2024. The limit increased from $22,500 to $23,000. 

The catch-up contribution limit for employees aged 50 and older for these plans remains $7,500, with an annual contribution limit of $30,500. 

Annual contributions to an IRA increased from $6,500 to $7,000. Deductions taxpayers can make on IRAs also were raised. View the complete list of changes here. 

The Society of Collision Repair Specialists (SCRS) has retirement plan account representatives that can help companies wanting to make changes to the plans offered. For more information, email Scott Broaddus at Scott.Broaddus@irongate-capital.com and Coley Eckenrode at Coley.Eckenrode@vamllc.com. More information can be found at scrs.com/401k/. 

Employers should additionally take note, according to the Economy Policy Institute, that 22 states and 38 cities and counties increased their minimum wage on Jan. 1.  

Hawaii has the largest increase of $2 for a total of $14 an hour. A full-time employee would see an increase of $1,380 annually in wages, an institute report said. 

Michigan had the smallest increase with its hourly wage changing from $10.10 to $10.33. A full-time worker would receive an additional $216 annually, the report said. 

Washington state now has the highest minimum wage due to an inflation adjustment, the report said. The state increased from $15.74 to $16.28 an hour.

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