The 2024 tax year brings several notable changes to the tax code that filers should be aware of when preparing their returns. Here are some of the major tax changes for 2024 that could impact your tax bill.
What to know before filing your taxes in 2024
Higher standard deduction
The standard deduction has been increased again for 2024. The standard deduction is now $13,850 for single filers and $27,700 for married couples filing jointly. This is up $300 from 2023. If you don’t itemize deductions, the higher standard deduction could lower your taxable income.
Higher Earned Income Tax Credit
The maximum Earned Income Tax Credit (EITC) has increased for 2024. The maximum credit is now $7,430 for filers with three or more qualifying children, up from $7,100 in 2023. The income limits to qualify for the credit have also been adjusted upward. More taxpayers may now qualify for the EITC, which helps lower-income workers reduce their tax burden.
Higher Child Tax Credit
As part of the Inflation Reduction Act passed in 2023, the enhanced Child Tax Credit has been extended through 2024. If your annual income is $200,000 or less ($400,000 or less if filing jointly), you’re eligible for a $2,000 credit. Partial credits might be allowed for income above that amount. See the IRS website for applicable forms and more eligibility information. This year, if the tax credit qualifies you for a refund, up to $1,600 of your Child Tax Credit is eligible to come back to you. The credit expansion will continue to help families offset the costs of raising children.
New clean vehicle credit
The credit for new qualified plug-in electric drive motor vehicles has changed. This credit is now known as the Clean Vehicle Credit. The maximum amount of the credit and some of the requirements to claim the credit have changed. The credit is reported on Form 8936, Qualified Plug-In Electric Drive Motor Vehicle Credit, and on Form 1040, Schedule 3.
Higher gift/estate tax exemption
For 2024, the lifetime gift tax exemption is $13.61 million, up from $12.92 million in 2023. That means individuals can gift or bequeath up to that amount tax free. Married couples can exempt twice that amount. The higher exemption reduces potential estate planning taxes.
Capital gains tax brackets adjusted
The income thresholds for the 0%, 15%, and 20% capital gains tax brackets have increased slightly for 2024 to account for inflation. Filers should calculate their capital gains using the updated brackets to ensure they are paying the correct tax rate. The top 20% rate starts at $571,600 for joint filers.:
The 0% tax rate applies at taxable incomes up to $94,050 for joint filers, $63,000 for heads of household and $47,025 for single filers.
The 15% tax rate is for filers with taxable incomes between the 0% and 20% break point.
The 20% tax rate starts at $583,751 for joint filers, $551,351 for heads of household and $518,901 for single filers.
These are some of the major federal tax changes taking effect for 2024 that all filers should review carefully. Understanding the updates to the tax code can help you maximize deductions, credits, and exemptions when you file your 2024 return next year. Reach out to your tax professional with any questions. And if you need to talk with a real human at the IRS, here’s how.
