Understand updates when preparing returns
Special to 318 Forum
Keeping up with the tax code can be a challenge. The 2024 tax year brings several significant changes to the tax code that individuals need to be aware of when preparing their returns.
Understanding these updates can help taxpayers maximize their benefits and avoid potential pitfalls.
Increased Standard Deduction
The standard deduction has increased for the 2024 tax year.
For single filers and married individuals filing separately, the standard deduction is now $14,600, up from $13,850 in 2023. For married couples filing jointly, the deduction has increased to $29,200, up from $27,700.
Heads of household will see their deduction rise to $21,900 from $20,800.
This increase helps to reduce taxable income for many taxpayers, simplifying the filing process for those who do not itemize deductions.
Higher Contributions Limits for Retirement Accounts
The contribution limits for retirement accounts have been adjusted for inflation. For 2024, the contribution limit for 401(k) plans is $23,000, up from $22,500 in 2023. Those aged 50 and over can contribute an additional $7,500, for a total of $30,500.
Individual Retirement Account (IRA) contributions have increased to $7,000 from $6,500, with the catchup contribution for those 50 and over remaining at $1,000.
Expanded Earned Income Tax Credit (EITC)
The Earned Income Tax Credit (EITC) has been expanded for the 2024 tax year. The maximum credit ranges from $632 for someone with no children to $7,830 for a family with three or more dependent children, up from $7,430 in 2023. The income thresholds for claiming the EITC have been adjusted upward, allowing more individuals and families to qualify for this valuable credit.
Changes to Tax Brackets
The income tax brackets for 2024 have been adjusted for inflation. The new brackets are as follows:
• 10% for income up to $11,600 for single filers, up to $23,200 for married filing jointly, up to $16,550 for head of household.
• 12% for income $11,601 to $47,150 for single filers, $23,201 to $94,300 for married filing jointly, $16,551 to $63,100 for head of household.
• 22% for income $47,151 to $100,525 for single filers, $94,301 to $201,050 for married filing jointly, $63,101 to $100,500 for head of household.
• 24% for income $100,526 to $191,950 for single filers, $201,051 to $383,900 for married filing jointly, $100,501 to $191,950 for head of household.
• 32% for income $191,951 to $243,725 for single filers, $383,901 to $487,450 for married filing jointly, $191,951 to $243,700 for head of household.
• 35% for income $243,726 to $609,350 for single filers, $487,451 to $731,200 for married filing jointly, $243,701 to $609,350 for head of household.
• 37% for income over $609,351 for single filers, over $731,201 for married filing jointly and over $609,351 for head of household.
**Married filing separately has the same income bracket as single filers.
Health Savings Account (HSA) Contribution Limits
For 2024, the contribution limits for Health Savings Accounts (HSAs) have increased. Individuals with self-only coverage can now contribute up to $4,150, up from $3,850 in 2023. For family coverage, the limit is $8,300, up from $7,750. The catch-up contribution limit for those aged 55 and over remains at $1,000.
Child Tax Credit
The Child Tax Credit (CTC) remains at $2,000 per qualifying child for the 2024 tax year. However, the refundable portion of the credit, known as the Additional Child Tax Credit (ACTC), will be worth $1,700, up from $1,600 in 2023. The income threshold for phaseout begins at $200,000 for single filers and $400,000 for married couples filing jointly.
