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2024 Tax Guide: Changes to Know When Filing Your Taxes

Tax time is around the corner and with it comes changes to the tax code that could affect your filing. Whether you're a small business owner hoping to capitalize on opportunities or a taxpayer eager to maximize credits, these changes are set to impact you directly. This year brings several significant updates, from new tax breaks to adjustments in existing credits. Here's a comprehensive guide to help you navigate this tax season effectively.

In 2024, the standard deduction for single taxpayers and those married but filing separately will increase to $14,600, up by $750 from the previous year. Similarly, for individuals filing as heads of households, the standard deduction is set at $21,900, which is a $1,100 rise from the 2023 tax year.

Save the Date: 2024 Filing Deadlines

Staying abreast of the filing deadlines is crucial to avoiding penalties and interest. For most taxpayers, the deadline will fall on April 15, 2024. However, residents of Maine and Massachusetts will have until April 17, 2024, to file due to Patriots' Day. Note these critical dates and ensure your tax obligations are met on time.

The Internal Revenue Service’s New Direct File Program and How to Leverage It

The IRS has introduced a new, free Direct File program, set to launch in mid-March. This initiative is designed for taxpayers with straightforward tax situations, allowing them to file electronically without cost. Eligibility is limited to residents of certain states and those with income primarily from W-2 forms, Social Security, or unemployment, and interest income of $1,500 or less. This program is part of a broader effort to streamline the tax filing process for millions of Americans.

Electric Vehicle Tax Credits: What You Need to Know

The push for a greener future continues with substantial tax credits for electric vehicle (EV) purchases. If you've purchased a new electric vehicle, you may be eligible for a tax credit of up to $7,500. However, this credit comes with specific criteria, including income limits and limits on the vehicle's retail price. Additionally, for those who opted for a used electric vehicle from a licensed dealer, a new credit offers up to $4,000, promoting more sustainable transportation choices.

Home Improvement and Energy Efficiency Tax Breaks

Thanks to the Inflation Reduction Act, homeowners making energy-efficient improvements can now enjoy more generous tax breaks. These include credits for installing items like exterior doors, windows, and insulation materials. The act also provides a separate credit for installing energy-efficient systems like solar panels, wind turbines, and more. These changes support not only the environment, but potentially your wallet as well.

Child Tax Credit Potential Adjustments

While there's potential for midseason changes to the child tax credit, it's advisable not to delay filing your taxes. The existing credit offers up to $2,000 per qualifying dependent under 17, with a portion being refundable.

Inflation Adjustments: Expect Changes in Tax Brackets and Deductions

Keeping in line with inflation, the IRS annually adjusts the tax brackets and standard deductions. These adjustments can impact your taxable income and the amount you owe. This year, the IRS has adjusted tax brackets and standard deductions to reflect the recent surge in inflation, ensuring taxpayers aren't unfairly taxed on inflation-driven income increases. Familiarize yourself with the updated amounts to calculate your tax liability.

Retirement Savings: Higher Contribution Limits

For those planning their retirement, the IRS has increased the contribution limits for 401(k) plans and IRAs. This change allows individuals to save more towards retirement, recognizing the need for greater savings in the current economic climate.

Online Income Reporting with Form 1099-K

The landscape of e-commerce and digital transactions continues to expand, and tax reporting is no exception. The IRS has delayed the implementation of a lower threshold for issuing Form 1099-K for online transactions. For this tax season, the old rules apply, requiring the form for activities exceeding 200 transactions and $20,000 in aggregate payments. This is particularly relevant for freelancers and gig workers who use platforms like Venmo or PayPal, for example, for their business transactions.

The 2024 tax season introduces several changes and new opportunities for taxpayers. Whether taking advantage of the electric vehicle tax credit, making energy-efficient home improvements, or understanding the new rules for online earnings, staying informed is key. Please consult a tax advisor to navigate these changes effectively and maximize your tax filings. Remember, being proactive and well-informed can lead to a smoother and potentially more beneficial tax season.