2024 IRS Inflation Adjustments
In early November of 2023 the Internal Revenue System announced the annual inflation adjustments for over 60 tax provisions for tax year 2024. The following provisions are potentially applicable to nonprofits.
Low Cost Article
The unrelated business income of certain tax-exempt organizations does not include proceeds from the distribution of “low cost articles” related to charitable solicitations (such as mugs or key chains imprinted with the organization’s logo). For the 2024 tax year, a low cost article is an article costing $13.20 or less, an 70 cent increase from 2023.
2024: $13.20
2023: $12.50
Other Insubstantial Benefits
In Revenue Procedure 90-12 (as amplified by Rev. Proc. 92-49 and modified by Rev. Proc. 92-102), the IRS provided guidelines for charitable organizations regarding the deductibility of contributions by donors who receive something in return for their payments. The original guidelines stated that even when donors receive benefits in return for their donations, they may still deduct the entire amount donated under one of the following two circumstances:
- If, for a contribution of $25 or more, the contributor did not receive something in return that costs more than $5, or the rate of a “low cost article,” as described above; or
- If the fair market value of all the benefits received in connection with the donation is not more than 2% of the payment, or $50, whichever is less.
The $5/$25/$50 schedule is adjusted annually for inflation. For the 2024 tax year, the schedule has been increased to $13.20, $66.00 and $132.00, respectively.
2024: $13.20/$66.00/$132.00
2023: $12.50/$62.50/$125.00
Mileage
Effective January 1, 2024, the mileage rate used to calculate the deductible cost of operating an automobile for business use of a vehicle is 67.0 cents per mile — an increase from the 65.5 cents per mile rate in 2023. The mileage rate for use of a vehicle for medical or moving purposes for 2024 is 21 cents per mile, a decrease by 1 cent from 2023. The standard mileage deduction rate for volunteer or charitable use of a vehicle, which is set by statute, remains 14 cents per mile.
2024:
- 67¢/mile for business use
- 21¢/mile for medical or moving purposes
- 14¢/mile for volunteer or charitable use
2023:
- 5¢/mile for business use
- 22¢/mile for medical or moving purposes
- 14¢/mile for volunteer or charitable use
Lobbying Expenditure Notice Exemption
Internal Revenue Code Section 6033(e) requires certain tax-exempt organizations that pay or incur non-deductible lobbying expenditures to provide their members and supporters, at the time dues (or other similar amounts) are assessed or paid, with a reasonable estimate of the portion of dues that is allocable to such expenditures. In 1998, the IRS issued Revenue Procedure 98-19, which established that 501(c)(4) social welfare organizations and 501(c)(5) agricultural and horticultural organizations are exempt from this notification requirement if more than 90% of their annual dues (or similar amounts) are received from persons, families or entities who pay $75 or less. This annual dues limitation is indexed for inflation, and has increased to $140 for the 2024 tax year.
2024: $140
2023: $132
Annual Exclusion for Gifts
The annual gift tax exclusion in 2024 increased to $18,000, up from $17,000 in 2023. The first $18,000 worth of gifts to any person during the year (other than gifts of future interests in property) will not be included in the total value of taxable gifts.
2024: $18,000
2023: $17,000
Retirement Plan Limits
Some of the key annual limits related to retirement plans have increased for 2024. The limit on total contributions to a defined contribution plan, such as a 401(k) or 403(b), rose from $66,000 to $69,000. Also increasing in 2023 is the maximum amount of an employee’s compensation which can be considered under a qualified pension, profit-sharing or stock bonus plan. The new limit is $345,000, a $15,000 increase over the 2023 limit.
Other key limits have been increased for 2024. The most an employee participating in a 401(k) or 403(b) may contribute to the plan increased to $23,000 in 2024, up from $22,500 in 2023. However, the “catch-up” contribution remains of $7,500 allowed for employees aged 50 and older for 2024. The limit on annual contributions to an IRA has increased to $7,000, up from $6,500 in 2023. The additional catch-up contribution to an IRA for those 50 and older is up remains $1,000 for 2024. The maximum limit on annual benefits under a pension or defined benefit is increased to $275,000, a $10,000 increase from 2023. The compensation threshold for who constitutes a “highly compensated employee” is increased to $155,000, a $5,000 increase from 2023.
Healthcare Flexible Spending Account Limits
In 2024, the amount employees may contribute to a health flexible spending account (FSA) without paying income or employment taxes has increased to $3,200, up from $3,050 in 2023.
2024: $3,200
2023: $3,050