Tax Rates
There are still seven tax rates but the income ranges (tax brackets) for each rate have shifted slightly to account for inflation. The tax rates range from a low of 10% for single filers with taxable income of $11,600 or less, all the way up to 37% for married couples filing jointly with taxable income of $731,201 or more.
Standard Deduction Versus Itemized Deductions
The standard deduction for tax year 2024 increases to $14,600 for single filers and married couples filing separately and to $21,900 for single heads of household, who are generally unmarried with one or more dependents. For married couples filing jointly, the standard deduction rises to $29,200.
Most taxpayers benefit from the standard deduction. But taxpayers who have enough tax-deductible expenses may benefit from itemizing, with the following limits:
• State and local taxes: The deduction for state and local income taxes, property taxes, and real estate taxes is capped at $10,000.
• Mortgage interest deduction: The mortgage interest deduction is limited to $750,000 of indebtedness for single and joint filers. However, taxpayers who had $1,000,000 of home mortgage debt before December 16, 2017, will still be able to deduct the interest on that loan.
• Medical expenses: Medical expenses that exceed 7.5% of adjusted gross income (AGI) can be deducted in 2024.
• Charitable donations: In 2024 the annual income tax deduction limits for gifts to public charities are 30% of AGI for contributions of non-cash assets—if held for more than one year—and 60% of AGI for contributions of cash If your deduction amount is higher than the limit excess amounts can be carried forward for up to five years.
Individual Retirement and 401(k) Accounts
The traditional IRA and Roth contribution limits for tax year 2024 increased slightly from 2023. Individuals can contribute up to $7,000 to an IRA, and those age 50 and older also qualify to make an additional $1,000 catch-up contribution. In addition, the 2024 contribution limits for tax-deferred 401(k)s and Roth 401(k)s have increased to $23,000. If you’re age 50 or older, you qualify to make an additional $7,500 catch-up contribution for this tax year as well.
Health Savings Accounts (HSAs)
For 2024, the maximum you can contribute to an HSA is $4,150 for an individual and $8,300 for a family. People 55 and older can contribute an extra $1,000 catch-up contribution. To be eligible for an HSA, you must be enrolled in a high-deductible health plan.
Child Tax Credit
For 2024, the Child Tax Credit is $2,000 per child age 17 or younger. The credit is also subject to a phase-out starting at $400,000 for joint filers and $200,000 for single filers. For other qualified dependents, you can claim a $500 credit.
Estate and Gift Tax
The estate and gift tax exemption, which is indexed to inflation, was increased to $13,610,000 for 2024. But this is set to expire at the end of 2025, unless Congress acts to retain it.
The annual gift exclusion, which allows you to give money to your loved ones each year without using up any of your lifetime estate and gift tax exemption, increases to $18,000 per recipient for 2024.
1099-K Reporting
The 1099-K reporting requirements will change in 2024 for clients who receive payments via third-party networks like PayPal or Venmo. The IRS is lowering the threshold for tax year 2024, which means that all clients who earn more than $5,000 in gross payments with any number of transactions will receive 1099-Ks.
529 College Savings Plans
As of January 1, 2024, unused funds in 529 Plans are now eligible for a rollover to a ROTH IRA, subject to some limitations:
• Lifetime limit: A taxpayer can roll over up to $35,000 in their lifetime.
• Annual contribution limit: The amount rolled over must be within the annual contribution limit for the Roth IRA. For 2024, the limit is $7,000, or $8,000 for those 50 and older.
• Beneficiary: The Roth IRA must be in the same name as the 529 plan beneficiary.
• Account age: The 529 plan must have been in existence for at least 15 years.
• Rollover funds: The funds rolled over must have been in the 529 plan for at least five years.
Electric Vehicle Credit
Taxpayers who purchased an electric car may get up to $7,500 in a credit, but the eligibility rules have become tighter. Limitations include income limits, price caps, and requirements that the vehicle meet other criteria such as having final assembly in North America.
Starting in tax year 2024, electric vehicle purchasers can transfer the credit to the car dealerships for an upfront discount, rather than waiting until they file their 2024 tax returns. This will appear as a reduction in the purchase price of the vehicle.
If you have questions about this featured topic or other accounting and tax related topics, please do not hesitate to contact us at 727-327-1999 OR [email protected].
ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.
