As we approach the 2025 tax filing season, it’s crucial for individuals and businesses to stay informed about recent tax law changes that may impact their federal income tax returns. The Internal Revenue Service (IRS) regularly updates tax regulations to reflect economic conditions, legislative changes, and policy priorities. Here’s an overview of some key changes for the 2024 tax year:
Adjusted Tax Brackets and Standard Deduction Increases
To account for inflation, the IRS has adjusted federal income tax brackets and standard deduction amounts for 2024:
- Standard Deduction for 2024:
- Single filers: $14,600
- Married filing jointly: $29,200
- Head of household: $21,300
- Tax Brackets: Income thresholds for the 10%, 12%, 22%, 24%, 32%, 35%, and 37% brackets have increased slightly to prevent “bracket creep.”
Enhanced Retirement Contribution Limits
The IRS has increased contribution limits for various retirement accounts:
- 401(k) Contribution Limit: Raised to $23,000 (with a catch-up contribution of $7,500 for those aged 50+).
- IRA Contribution Limit: Increased to $7,000 (with a catch-up contribution of $1,000 for those aged 50+).
Encouraging retirement savings is a key focus of these changes, offering taxpayers greater opportunities to secure their financial future.
Child Tax Credit and Earned Income Tax Credit Updates
The Child Tax Credit (CTC) remains at $2,000 per qualifying child, with up to $1,600 refundable. However, thresholds for eligibility have been indexed for inflation.
The Earned Income Tax Credit (EITC) income limits and maximum credit amounts have also been adjusted:
- For single filers with three or more qualifying children, the maximum credit is $7,482.
New Reporting Requirements for Digital Assets
For the 2024 tax year, the IRS has introduced new reporting rules for digital assets, such as cryptocurrency and NFTs:
- Taxpayers must report all transactions involving digital assets, including sales, exchanges, and payments received in digital currencies.
- Form 1099-DA: A new form for reporting digital asset transactions will be issued to taxpayers and shared with the IRS.
Good record-keeping is essential for taxpayers engaging in these transactions.
Lower 1099-K Reporting Threshold
The IRS will continue its phased implementation of the $600 reporting threshold for third-party payment platforms like Venmo, PayPal, and eBay.
- Businesses and individuals receiving over $600 for goods or services in 2024 will receive Form 1099-K.
- Personal transactions, such as reimbursements or gifts, remain non-taxable.
Affordable Care Act (ACA) Premium Tax Credit Changes
The enhanced premium tax credits for health insurance purchased through the ACA marketplace have been extended for 2024. Taxpayers should verify their income eligibility to maximize these credits.
Depreciation and Business Expense Updates
- Section 179 Expensing: The maximum deduction limit has increased to $1,200,000, with a phase-out threshold beginning at $2,890,000.
- Bonus Depreciation: The deduction for bonus depreciation continues to phase down and is now set at 60% for 2024.
These updates are critical for businesses planning major equipment purchases.
Energy-Efficient Home Improvement and Vehicle Credits
Taxpayers can continue to benefit from incentives for adopting energy-efficient technologies:
- Energy-Efficient Home Improvement Credit: Increased limits for qualifying upgrades like windows, doors, and HVAC systems.
- Clean Vehicle Credit: Up to $7,500 for qualifying electric and plug-in hybrid vehicles.
Changes to Refund Timing for Certain Credits
As required by the PATH Act, the IRS will delay issuing refunds for returns claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) until mid-February. This delay helps reduce identity theft and fraudulent claims.
Filing Deadlines
The tax filing deadline for the 2024 tax year is April 15, 2025. Taxpayers who need more time can request an automatic six-month extension, pushing their filing deadline to October 15, 2025.
Preparing for Tax Season
With these changes in mind, now is the perfect time to organize your financial records, review your tax situation, and consult a tax professional. Staying informed and proactive can help you avoid surprises, maximize deductions, and ensure a smoother filing process.
Visit IRS.gov or consult a licensed tax preparer for more detailed information about these updates.
This year’s changes reflect ongoing efforts to adapt the tax system to economic trends and taxpayer needs. By understanding and planning for these updates, you can file your 2024 tax return confidently and efficiently in 2025.
