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Tax Updates

Tax News

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NEWS

Here's a summary of key 2024 tax updates:

Individual Tax Updates

  • Standard Deduction Increase:

    • The standard deduction has increased for 2024. For single filers, it’s now $14,600 (up from $13,850 in 2023). For married couples filing jointly, it’s $29,200 (up from $27,700 in 2023).

  • Tax Bracket Adjustments:

    • The income thresholds for tax brackets have been adjusted for inflation. The top tax rate of 37% now applies to income over $663,750 for single filers and $1,327,500 for married couples filing jointly.

  • Earned Income Tax Credit (EITC) Changes:

    • The maximum EITC for taxpayers with three or more qualifying children has increased to $7,540. Income limits and credit amounts have been adjusted for inflation.

Business Tax Updates

  • Corporate Tax Rate:

    • The corporate tax rate remains at 21% for 2024, as established by the Tax Cuts and Jobs Act of 2017. There are no changes to this rate for the year.

  • Bonus Depreciation:

    • The 100% bonus depreciation for qualified property has been phased down to 80% for assets acquired and placed in service in 2024. This is part of the gradual reduction established by the Tax Cuts and Jobs Act.

  • Research and Development (R&D) Expenses:

    • Businesses are now required to capitalize and amortize R&D expenses over five years, effective for tax years beginning in 2024. This change impacts how companies can deduct their R&D costs.

Other Updates

  • Retirement Savings Contributions:

    • Contribution limits for 401(k) plans have increased to $23,500 for employees under age 50, and $30,500 for those age 50 and older (catch-up contributions).

  • Health Savings Accounts (HSAs):

    • The contribution limit for HSAs has increased to $4,500 for individuals and $9,200 for families. The minimum deductible for high-deductible health plans is $1,600 for individuals and $3,200 for families.

  • Child Tax Credit (CTC):

    • The CTC remains at $2,000 per qualifying child. However, the phase-out thresholds have been adjusted for inflation, increasing the income level at which the credit begins to phase out.

These updates reflect ongoing adjustments to tax policies and inflationary changes, aiming to accommodate shifting economic conditions and ensure fairness in the tax system.

For specific advice or detailed planning, consulting with a tax professional is recommended.

KEY TAKEAWAYS

  • Proper tax planning requires an awareness of what's new and changed from last year — and there are lots of tax law changes and updates for 2024 that you need to know.

  • The government’s massive year-end funding legislation, the SECURE 2.0 Act contains a slew of retirement provisions, with some important ones taking effect for 2024. 

  • Green-energy tax breaks for buying electric vehicles and making home improvements were included in last year’s Inflation Reduction Act. 

  • And last year’s high inflation numbers made the income tax brackets and other inflation-adjusted figures soar. 

  • To help you out, we put together a list of the most important tax law changes and adjustments for 2024, with some related items grouped together. Pay attention to these changes because they can hurt or help your bottom line. Use this information now so you can hold on to more of your hard-earned money when it's time to file your 2024 return.

RETIREMENT FUNDS  WITHDRAWALS & LOANS

Retirement fund withdrawals and loans require careful consideration to avoid financial pitfalls. Withdrawals from traditional IRAs and 401(k) plans are typically taxed as ordinary income, and early withdrawals before age 59½ may incur a 10% penalty unless qualifying exceptions apply. Required Minimum Distributions (RMDs) must begin at age 73 (or 75 if reaching 73 after 2023). While 401(k) plans allow for loans up to $50,000 or 50% of the vested balance, they must be repaid within 5 years, impacting long-term savings. IRAs do not permit loans, and any attempted borrowing is treated as a taxable distribution. Careful planning is essential to manage these withdrawals and loans effectively and to mitigate potential impacts on retirement savings and tax implications.

REQUIRED MINIMUM  DISTRIBUTIONS (RMDs)

Required minimum distributions (RMDs) are mandatory withdrawals that individuals must start taking from traditional IRAs and 401(k) plans at age 73, or 75 if reaching 73 after 2023. The RMD amount is calculated based on the account balance at the end of the previous year divided by a life expectancy factor provided by IRS tables. RMDs are taxed as ordinary income, and failing to withdraw the required amount can result in a hefty penalty of 50% of the missed distribution. Roth IRAs do not require RMDs during the account holder’s lifetime, though beneficiaries must take RMDs from inherited Roth IRAs. Proper planning is essential to manage the tax impact and maintain your retirement savings.

CREDITS

Earned income tax credit 2024 For the 2024 tax year (taxes filed in 2025, the earned income credit ranges from $600 to $7,540, depending on your filing status and how many children you have.

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The Child Tax Credit is worth a maximum of $2,000 per qualifying child. Up to $1,500 is refundable. To be eligible for the CTC, you must have earned more than $2,500.

HEALTH  SPENDINGS

ESTATES  & GIFTS

Estates of decedents who die during 2024 have a basic exclusion amount of $13.6 million, up from $12.92 million for estates of decedents who died in 2023. The annual exclusion for gifts is $17,000 for calendar 2020, the same as it was for calendar 2019.

THE BOTTOM LINES

Health Savings Accounts (HSAs):

  • The contribution limit for HSAs has increased to $4,500 for individuals and $9,200 for families. The minimum deductible for high-deductible health plans is $1,600 for individuals and $3,200 for families.

The inflation adjustments of the IRS are meant to ease federal taxes for taxpayers, so it pays to know the latest figures, which you can use to thoughtfully plan for the 2024 tax year.

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