New Tax Laws in 2024 Explained (WATCH BEFORE FILING)

As we approach tax season, it’s crucial to stay informed about the new tax laws for 2024. This year brings several changes that could impact your filing process, from adjustments in tax brackets to new credits and deductions. Here’s what you need to know before you file.

• Increased Tax Brackets: Higher income thresholds for lower tax rates.
• Capital Gains Adjustments: New limits for zero tax rates on capital gains.
• Standard Deduction Increase: Higher deductions for various filing statuses.
• Child Tax Credit Proposals: Potential changes in refundable amounts.
• 401(k) Contribution Limits: Increased limits for retirement savings.
• Social Security COLA: A 3.2% increase in benefits.
• Gift Tax Rate Changes: New limits for tax-free gifts.
• Health Savings Account Limits: Increased contribution limits for HSAs.
• Earned Income Tax Credit: Expanded eligibility and benefits.
• New Reporting Requirements: Changes in beneficial ownership reporting and Form 1099-K thresholds.

The 2024 federal income tax brackets have been adjusted, allowing you to earn more before hitting higher tax rates. Here’s a quick look at the new brackets:

For long-term capital gains, the thresholds have also increased. Here’s what you need to know:

• Zero Tax Rate: For single filers, the limit is now $47,552.
• 15% and 20% Rates: These brackets have also been adjusted, allowing for more favorable tax treatment on gains.

The standard deduction has seen a rise, helping taxpayers keep more of their income:

• Single: Increased from $13,850 to $14,600.
• Married Filing Jointly: Increased from $27,700 to $29,200.
• Head of Household: Increased from $20,800 to $21,900.

Currently, the Child Tax Credit remains at $2,000 per child under 17, with a refundable portion of $1,600. However, there are proposals in Congress that could increase the refundable amount to $2,000 by 2025. Stay tuned for updates on this potential change.

The American Opportunity Tax Credit allows for a maximum of $2,500 per eligible student for education expenses. This credit can significantly reduce your tax liability, especially for families with college students.

For 2024, the contribution limits for retirement accounts have increased:

• 401(k): Up to $23,000, up from $22,500.
• IRA: Increased to $7,000 from $6,500.

In 2024, Social Security benefits will see a 3.2% increase. This adjustment is crucial for those relying on fixed incomes, although many argue it’s not enough to keep pace with inflation.

The gift tax limit has increased from $17,000 to $18,000 for 2024. This means you can gift more without triggering tax implications, which is great for estate planning.

For 2024, the HSA contribution limits have also increased:

• Self-only coverage: Up to $4,150.
• Family coverage: Up to $8,300.

The EITC will range from $632 to $7,830 for 2024, depending on your filing status and number of children. Many eligible taxpayers overlook this credit, so it’s worth checking if you qualify.

1. Beneficial Ownership Reporting: New requirements for companies to report ownership information to FinCEN, effective January 1, 2024.
2. IRS Interest Rates: Rates for underpayments and overpayments will be 8% for individuals, increasing the cost of unpaid taxes.
3. Form 1099-K Reporting: The threshold for reporting payments has been set at $5,000 for tax year 2024, a change from previous years.

Navigating the new tax laws for 2024 can be daunting, but staying informed is key. Make sure to consult with a tax professional to understand how these changes may affect your specific situation. As always, keep an eye out for further updates as tax season approaches!