Tax Changes You Need to Know Before Filing in 2024

The tax landscape shifts every year, bringing new rules, thresholds, and opportunities for taxpayers. Whether you're preparing your own return or working with a professional, understanding the latest tax changes can help you maximize deductions, avoid penalties, and potentially reduce your tax burden.

Key Tax Rate and Bracket Adjustments

The IRS has implemented inflation adjustments to tax brackets for 2024, which affects virtually all taxpayers. These adjustments help prevent 'bracket creep,' where inflation pushes taxpayers into higher tax brackets without actual increases in purchasing power.

For individuals filing as single, the standard deduction increased to $14,600, up from $13,850 in the previous year. Married couples filing jointly will see their standard deduction rise to $29,200, an increase of $1,500 from the prior year. These adjustments mean most taxpayers will be able to shield more of their income from taxation, potentially resulting in lower tax bills for those who don't itemize deductions.

Additionally, income thresholds for all tax brackets have increased. For example, the 22% tax bracket now applies to incomes between $47,151 and $100,525 for single filers, compared to the previous range of $44,726 to $95,375. This adjustment helps offset the effects of inflation on taxpayer incomes.

Retirement Account Contribution Limits

Retirement savers will find new opportunities with increased contribution limits across various retirement accounts. The contribution limit for 401(k), 403(b), and most 457 plans has increased, allowing workers to set aside more pre-tax income for retirement.

Individual Retirement Account (IRA) contribution limits have also been adjusted. Traditional and Roth IRA contribution limits increased to $7,000, up from $6,500 in the previous year. For those age 50 and older, the catch-up contribution remains at $1,000, making their total contribution limit $8,000.

The income phase-out ranges for IRA deductibility have also changed. For single taxpayers covered by a workplace retirement plan, the phase-out range has increased, allowing more individuals to make at least partial deductible contributions to their traditional IRAs. These changes provide greater flexibility for retirement planning and potentially larger tax deductions for those who maximize their contributions.

Tax Credit Modifications

Several important tax credits have undergone modifications that could significantly impact many taxpayers' returns. The Child Tax Credit, while not restored to its pandemic-era expansion levels, maintains its maximum value of $2,000 per qualifying child under age 17, with up to $1,600 being refundable.

The Earned Income Tax Credit (EITC), which benefits low to moderate-income workers, has seen inflation adjustments to its income limits and maximum credit amounts. For a family with three or more qualifying children, the maximum credit has increased, providing additional support to working families.

The American Opportunity Tax Credit and Lifetime Learning Credit, which help offset education costs, remain unchanged in their maximum values but have adjusted income phase-out thresholds. These credits continue to provide valuable tax relief for students and families investing in education.

Additionally, energy-efficient home improvement tax credits remain available, encouraging taxpayers to make environmentally conscious upgrades while reducing their tax liability. These include credits for solar panel installation, energy-efficient windows, and certain heat pumps through programs supported by the Department of Energy.

Tax Software and Service Provider Comparison

With tax code changes becoming increasingly complex, many taxpayers rely on professional services or software to prepare their returns accurately. Below is a comparison of leading tax preparation options:

Provider	Free Option	Premium Features	Audit Support
TurboTax	Yes (for simple returns)	Live CPA assistance, investment income support	Available with higher tiers
H&R Block	Yes (for simple returns)	In-person option, self-employed support	Included with some packages
TaxAct	Yes (limited)	Lower cost premium tiers, investment support	Available as add-on
FreeTaxUSA	Yes (federal only)	All forms included in basic package	Available as add-on

When selecting a tax preparation method, consider your specific tax situation. Those with simple returns might benefit from IRS Free File options, while those with complex situations involving investments, self-employment income, or multiple state returns might find value in premium services from established providers like TaxSlayer or professional assistance from certified public accountants.

Important Filing Deadlines and Extensions

Understanding tax deadlines is crucial to avoid penalties and interest charges. The standard filing deadline for individual tax returns is April 15, though this can vary if the date falls on a weekend or holiday.

If you need more time to file, you can request an automatic six-month extension using Form 4868, which extends your filing deadline to October 15. However, it's essential to note that an extension to file is not an extension to pay. Any taxes owed are still due by the original April deadline to avoid penalties and interest.

For those affected by federally declared disasters, the Internal Revenue Service often provides extended deadlines and special relief. Always check the IRS website for announcements related to your area if you've been impacted by a natural disaster.

Quarterly estimated tax payments, required for self-employed individuals and those with significant non-wage income, have their own set of deadlines throughout the year. These payments are typically due on April 15, June 15, September 15, and January 15 of the following year. Missing these deadlines can result in underpayment penalties, so mark your calendar accordingly.

Conclusion

Staying informed about tax changes is essential for effective financial planning and maximizing your tax advantages. This year's adjustments to tax brackets, deductions, and credits present opportunities for many taxpayers to reduce their tax burden while planning effectively for the future. Consider consulting with a tax professional from firms like AICPA member organizations to ensure you're leveraging all available benefits under the current tax code. Remember that tax planning is a year-round activity, not just a seasonal concern. By understanding these changes and planning accordingly, you can approach tax season with confidence and potentially improve your overall financial position.

Citations

This content was written by AI and reviewed by a human for quality and compliance.