The 2024 tax season is upon us! The IRS started accepting tax returns on January 29, and will continue to accept federal tax returns through April 15. As the agency anticipates over 128 million filings, understanding the alterations in tax laws becomes paramount. Join us as we break down the intricacies, ensuring you navigate the tax landscape with confidence.
Standard Deductions Take a Leap
One of the fundamental choices taxpayers face is whether to take the standard deduction or itemize. For the 2023 tax returns filed in 2024, the standard deduction amounts have seen a substantial increase. This means that a significant portion of taxpayers may enjoy reduced taxes, simplifying the filing process.
- Single: $13,850
- Married Filing Jointly: $27,700
- Married Filing Separately: $13,850
- Head of Household: $20,800
- Qualifying Widow(er): $27,700
Furthermore, those who are 65 and older or visually impaired are eligible for additional standard deductions, offering further relief.
Adjustments in Income Tax Brackets
In conjunction with the elevated standard deductions, the IRS has tweaked income tax brackets from the 2022 tax year. This means that taxpayers may find themselves in a lower tax bracket, potentially resulting in a reduced tax bill.
As an illustrative example, a single taxpayer with a taxable income of $44,000 in 2023 would face a marginal tax rate of 12%, compared to the 22% rate in the preceding year. Understanding these adjustments is crucial for effective tax planning.
Delay in 1099-K Reporting Threshold for Payment Apps
Originally scheduled for implementation in the current tax season, changes to the reporting threshold for Form 1099-K related to payment apps have been delayed. The initial requirement, reduced to $600 or more by the American Rescue Plan, is now expected to be gradually phased in during 2024. Taxpayers can anticipate forms reflecting transactions of $5,000 or more starting in January 2025.
Changes in Business Deductions
For business owners, adapting to changes in deductions is integral to financial planning. Several aspects demand attention:
- Business Meals: The 100% deduction for work-related meals at restaurants, introduced as a temporary relief during the pandemic, reverts to the 50% limit for the 2023 tax year.
- Standard Mileage Rates: Small business owners relying on their vehicles for work-related transportation can benefit from an increased standard mileage rate of 65.5 cents per mile driven, up by 3 cents from the midyear 2022 rate.
- Bonus Depreciation: The Tax Cuts and Jobs Act (TCJA) brought bonus depreciation into play, allowing businesses to write off a substantial portion of qualified asset costs. However, for assets placed in service in 2023, the bonus depreciation percentage decreases to 80%, marking the beginning of a gradual reduction over the next few years.
The evolving tax landscape of 2024 holds both challenges and opportunities. At Coastal Tax & Accounting, we are committed to guiding you through these changes and ensuring that you navigate the intricate tax maze with confidence. Stay informed, stay proactive, and let us be your partner in financial success. Reach out to us today at 843.549.5561.