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Tax season is here again! It’s time to get prepared, get filed, and get your refund! Last year, we walked through the basics of filing your taxes—types of taxes, how taxes are calculated, steps for filing, and what to expect after you file. We recommend starting there if you’re new to filing, wondering which kinds of taxes may apply to you, or still working on filing your 2023 taxes.
On the other hand, tax rules and procedures are ever-evolving and they aren’t always straightforward. So, if you’ve got the hang of filing, let’s talk about what’s new for the 2024 tax year and what these changes may mean for your household.
Tax rules change often, and for a number of reasons. According to the Tax Policy Center, tax rules change to accommodate various national goals, politics, and changes in legislation. Mainly, when it comes to taxes, one size can’t fit all. Tax rules take individual characteristics into account, like marital status or number of dependents. There are also rules like tax credit or deduction eligibility to help folks with various expenses that don’t apply to everyone like higher education costs, childcare costs, etc. Politics can come into play as groups or politicians work to secure tax subsidies for certain activities to encourage social change. This is evident in the tax credits that incentivize using electric vehicles and clean energy. Politics can also affect tax rules by influencing legislation. For example, the 2017 Tax Cuts and Jobs Act (TCJA) that went into effect in 2018 had major implications for how everyday individuals file their taxes, and it’s set to expire at the end of this year, so we can expect more substantial changes to tax rules for the 2026 tax season.
Quite a few things have changed about filing your taxes since last tax season. Some you might expect, like new tax brackets to adjust for inflation, but there might be a few that surprise you.
You might recall that the United States uses marginal tax rates with progressive framework to determine how much one person will pay in taxes. Each filing status has its own tax brackets, with a defined rate applied to each bracket, and the brackets regularly change year after year to adjust for inflation. The table below breaks down the different tax brackets according to filing status so you can determine how much you’re likely to pay for tax year 2024. (Visit our Taxes 101 blog post to see tax year 2023’s brackets.)
Tax deductions are qualifying expenses or losses that can be subtracted from your income when filing, so your taxes will be lower. Deductions can either be itemized, if you have multiple expenses that qualify, or you might opt for the standard deduction, a lump sum set by the IRS that can be deducted from your income when filing. Like tax brackets, deduction amounts change year over year to adjust for inflation. The following table shows the changes in the standard deduction between tax years 2023 and 2024.
The Earned Income Tax Credit provides a tax break for lower-income families, and the income thresholds and payout amounts increased for 2024, meaning more people will qualify for and receive more help this year. The following tables display changes in the adjusted gross income (AGI) thresholds to qualify and the maximum credit amount between tax years 2023 and 2024.
The investment income limit also increased from $11,000 to $11,600.
The Adoption Tax Credit lessens the tax burden for families who have faced adoption expenses. For tax year 2024, the credit amount has increased from $15,950 to $16,810. The income thresholds have also increased, so more folks can take advantage of the tax break. In tax year 2023, families with an AGI below $239,230 could claim full credit, families with incomes between $239,230 to $279,230 could claim a partial credit, and families with incomes that exceed $279,230 were not eligible to claim the credit. New this year, you can qualify for full credit if your family’s AGI was below $252,150, partial credit if your income was between $252,151 and $292,150, and no credit if your income was above $292,150.
Expecting to see the Child Tax Credit here? Unfortunately, the buzz you may have seen on social media surrounding updates to this credit for the 2024 tax year were untrue, the credit is still available for up to $2,000 per qualifying child. In summer of 2024, the IRS warned about misleading social media claims. This serves as a reminder to rely solely on trusted sources and the IRS for up-to-date information on correctly filing your taxes.
To learn more about deductions or credits and see if you qualify, visit https://www.irs.gov/credits-and-deductions.
A major update to tax rules that folks have been following for a couple years is the new requirement to receive a 1099-K form if you’ve made over $5,000 through payment apps or digital platforms like Venmo, PayPal, CashApp, Zelle, Facebook Marketplace, and Etsy, among others (the IRS refers to these as third party settlement organizations or TPSOs). The TPSO should send you your 1099-K directly, but regardless of if you receive one you’ll need to claim any income made there. You may have originally heard of the impending change back in 2022 or 2023, although it was put on hold both years. The rule change is finally going into effect for the 2024 tax year, so be sure to wait for your 1099-K to be available before you file.
While this rule mainly affects freelancers and entrepreneurs, you may still be wondering if it will apply to personal payments (like birthday money from your mom or your friend repaying you for lunch). Thankfully, the answer is NO! Make sure your payer notes these transactions as “non-business” in the payment app when possible. If you do receive a 1099-K that includes personal transactions, contact the issuer immediately (issuer information can be found in the top left corner of the form) and ask for a corrected form. Make and retain copies of the original 1099-K and your correspondence with the issuer for your records.
In previous years, if you filed your taxes electronically and you claimed a dependent that someone else also claimed, your return would be rejected. Starting in tax year 2024, this rule no longer applies. If you and an ex-spouse trade off on claiming your children each year, this may have come up for you in the past. It could also happen if you’ve been a victim of identity theft or someone has fraudulent filed in your name. Thanks to the new rule change, even if someone has already claimed your dependent, you’ll be able to file your return (as long as you have an identity protection PIN (IP PIN) for the current year) and the details regarding the dependent will be worked out at a later time.
The annual contribution limit for 401(k)s has increased from $22,500 to $23,000. Individuals over the age of 50 can contribute up to $30,500. The annual contribution limit for IRAs has increased from $6,500 to $7,000. Folks older than 50 can contribute up to $8,000.
Social Security Tax—maximum earnings subject to social security tax has increased from $160,200 in 2023 to $168,600.
Gift Tax—the gift tax exclusion has increased from $17,000 in 2023 to $18,000.
Fringe Benefits—the monthly limit for qualified transportation and parking benefits increased from $300 in 2023 to $315.
