Tax season is right around the corner, and with a new year comes potential changes to the tax code passed by Congress. While most changes won’t take effect until taxes are filed in 2024, it’s helpful to understand what amendments may impact your 2024 taxes. Let’s break down some fundamental tax law changes on the horizon.
Income Tax Bracket Adjustments
As inflation rises, the IRS announces annual adjustments to tax brackets to avoid “bracket creep.” For 2023, the standard deduction increased to $13,850 for individuals and $27,700 for married filing jointly. The widths of the seven tax brackets will also be slightly wider. Your taxable income must exceed these higher thresholds to jump to the next higher bracket.
Increased Child Tax Credit Eligibility
The revised Child Tax Credit is now permanent, and eligibility has been expanded through 2024. While the maximum credit remains at $2,000 per qualifying child, children under the age of 6 now qualify families for a credit of up to $3,000, and children between 6 and 17 qualify families for a credit of up to $3,000. The income threshold has also increased to $200,000 for individual filers and $400,000 for joint filers.
Changes to the Affordable Care Act
Premiums paid for healthcare plans in ACA marketplaces are now fully deductible from 2023 onward. A new maximum out-of-pocket limit will be introduced to limit healthcare costs for marketplace plans purchased through the exchanges. These adjustments aim to make Obamacare plans more affordable and reduce costs for individuals and families.
For businesses, depreciation allowance rules may also need an overhaul. The full expensing of qualified improvement property under the QIP rules is set to be phased out after 2023. However, renewed legislation could make this famous tax break for commercial real estate owners and contractors permanent starting in 2024. Carefully tracking your assets can help maximize bonus depreciation if QIP remains in place.
On the individual side, proposed changes involve increasing caps for retirement savings vehicles like 401ks and IRAs. More comprehensive contribution limits would encourage more Americans to save for the future while lowering current tax obligations. However, these increases are still being debated in Congress.
While predictions are difficult, staying informed on the policy discussions around tax reform can help you strategically plan your finances and taxes in the years ahead. Check back for updates as the 2024 tax landscape becomes more apparent. Speaking with a tax advisor will also help ensure you know of any new laws that could impact you and your situation. Proper preparation is critical to getting the maximum benefit under an ever-evolving tax code.
Conclusion
As always, speak with a tax professional if you have any other questions about how these or other upcoming changes may impact your tax situation. Proper planning with the latest tax rules in mind can help you maximize benefits and reduce your overall tax obligation. Stay tuned for more details on 2024 tax filing as the new year progresses.
