For the 2024 tax year, there are several important changes that taxpayers should be aware of:
Standard Deduction Increases: The standard deduction amounts have increased to account for inflation. For 2024, the standard deduction is:
$29,200 for married couples filing jointly.
$14,600 for single taxpayers and married individuals filing separately.
$21,900 for heads of households.
Tax Bracket Adjustments: The income tax brackets have been adjusted for inflation. The top tax rate remains 37% for single taxpayers with incomes over $609,350 and for married couples filing jointly with incomes over $731,200. Other rates include 35%, 32%, 24%, 22%, 12%, and 10%, with specific income thresholds for each bracket.
Earned Income Tax Credit (EITC): The maximum EITC amount for taxpayers with three or more qualifying children has increased to $7,830 for the 2024 tax year. To claim the EITC without a qualifying child, taxpayers must be at least age 25 but under age 65 at the end of 2024.
Alternative Minimum Tax (AMT) Exemption: The AMT exemption amount for 2024 is $85,700 and begins to phase out at $609,350 for single taxpayers and $1,218,700 for married couples filing jointly.
1099-K Reporting Threshold: The threshold for reporting payments via third-party networks like PayPal or Venmo has been lowered to $5,000 in gross payments for the 2024 tax year.
Contribution Limits for Retirement Accounts: Contribution limits for retirement accounts, such as IRAs and 401(k)s, have increased. The IRA contribution limit is now $7,000 ($8,000 for individuals aged 50 or older).
Additional Child Tax Credit (ACTC) Updates: The maximum ACTC amount has increased to $1,700 per qualifying child. Bona fide residents of Puerto Rico can now claim the ACTC with one or more qualifying children.
Adoption Credit: The Adoption Credit and the exclusion for employer-provided adoption benefits are both $16,810 per eligible child in 2024, with a phase-out starting at AGI over $252,150.
Clean Vehicle Credit: Available for new and used clean vehicles. Use Form 8936 to claim this credit.
These changes are designed to account for inflation and provide taxpayers with updated thresholds and limits for the 2024 tax year. Staying updated on these changes can help you file an accurate and beneficial tax return.