By Nayelis Delgado
With the start of the new year, we want to take this opportunity to inform you of the tax law changes you should expect to see. Below are some of the most important changes that you should be aware of when you file your 2024 tax return.
Long-Term Capital Gain Rates
The long-term capital gain rates and qualified dividends have changed for 2024:
Filing status | 0% rate | 15% rate | 20% rate | |||
2023 | 2024 | 2023 | 2024 | 2023 | 2024 | |
Single | $0 to $44,625 | $0 to $47,025 | $44,626 to $492,300 | $47,026 to $518,900 | $492,301 and above | $518,901 and above |
Married, filing separately | $0 to $44,625 | $0 to $47,025 | $44,626 to $276,900 | $47,026 to $291,850 | $276,901 and above | $291,851 and above |
Head of household | $0 to $59,750 | $0 to $63,000 | $59,751 to $523,050 | $63,001 to $551,350 | $523,051 and above | $551,351 and above |
Married, filing jointly | $0 to $89,250 | $0 to $94,050 | $89,251 to $553,850 | $94,051 to $583,750 | $553,851 and above | $583,751 and above |
Unemployment Compensation
For 2024, unemployment compensation will be fully taxable.
Health Savings Accounts (HSAs)
For tax year 2024, the annual cap for deductible contributions to health savings accounts increased from $3,850 to $4,150 for self-only coverage, and from $7,750 to $8,300 for family coverage.
Retirement Plans
The required minimum distributions are necessary for 2024 only if you were 72 years old in 2023, thereby requiring your first required minimum distribution by April 1, 2024, and the second by December 31, 2024. If you reach the age of 72 in 2024, you will not have to take a required minimum distribution until the 2025 tax year, which will be due by April 1, 2026.
Standard Deduction
The Standard Deduction increased for 2024:
Filing Status | Standard Deduction | Additional Standard Deductions Blind OR 65 or older | Additional Standard Deductions Blind AND 65 or older | |||
2023 | 2024 | 2023 | 2024 | 2023 | 2024 | |
Single | $13,850 | $14,600 | $1,850 | $1,950 | $3,700 | $3,900 |
Married, filing separately | $13,850 | $14,600 | $1,500 | $1,550 | $3,000 | $3,100 |
Head of household | $20,800 | $21,900 | $1,850 | $1,950 | $3,700 | $3,900 |
Married, filing jointly | $27,700 | $29,200 | $1,500 | $1,550 | $3,000 | $3,100 |
Charitable Gift Deduction
For tax year 2024, the limit on charitable cash contributions is up to 60% of the taxpayers adjusted gross income in monetary gifts. When filing your tax return make sure that cash contributions do not exceed the charitable contributions limit of 60%.
Long-Term Care Insurance Premiums
The deduction for long-term care insurance premiums has increased for 2024:
Age | 2023 Deduction | 2024 Deduction |
40 years of age and younger | $480 | $470 |
41 to 50 years of age | $890 | $880 |
51 to 60 years of age | $1,790 | $1,760 |
61 to 70 years of age | $4,770 | $4,710 |
71 years of age and older | $5,960 | $5,880 |
Taxpayers are still subject to the 7.5% limitation of their adjusted gross income with respect to the medical deduction when itemizing deductions.
Standard Mileage Rates
For 2024 the standard mileage rates are $0.67 per mile for business, and $0.21 per mile for medical travel and military moves. These limits have changed compared to last year, which stood at $0.655 and $0.22, respectively. The charitable driving rate remains at $0.14 a mile as it has been in previous years.
Alternative Minimum Tax
For 2024, the alternative minimum tax exemption has increased from $126,500 to $133,300 for married filing jointly filers, and from $81,300 to $85,700 for single and head-of-household filers.
There are also higher phaseouts for this exemption in 2024. The phaseouts are $1,218,700 for married filing jointly filers and $609,350 for single and head-of-household filers, which is an increase from the 2023 amounts of $1,156,300 and $578,150, respectively.
Estate and Gift Taxes
For 2024, the lifetime estate and gift tax exclusion has increased from $12.92 million to $13.61 million. The 2024 gift tax exclusion is up $1,000 from the 2023 amount of $17,000; now standing at $18,000 per recipient without having to file a gift tax return or tap into your lifetime estate and gift tax exemption.
Tax Brackets for 2024:
Tax Rate | Single | Married, filing separately | Head of household | Married, filing jointly |
10% | $0 to $11,600 | $0 to $11,600 | $0 to $16,550 | $0 to $23,200 |
12% | $11,601 to $47,150 | $11,601 to $47,150 | $16,551 to $63,100 | $23,201 to $94,300 |
22% | $47,151 to $100,525 | $47,151 to $100,525 | $63,101 to $100,500 | $94,301 to $201,050 |
24% | $100,526 to $191,950 | $100,526 to $191,950 | $100,501 to $191,950 | $201,051 to $383,900 |
32% | $191,951 to $243,725 | $191,951 to $243,725 | $191,951 to $243,700 | $383,901 to $487,450 |
35% | $243,726 to $609,350 | $243,726 to $365,600 | $243,701 to $609,350 | $487,451 to $731,200 |
37% | $609,351 and higher | $365,601 and higher | $609,351 and higher | $731,201 and higher |
Child Tax Credit
For the 2024 tax year, the Child Tax Credit (CTC) is $2,000 per child aged under 17 years old; the same as 2023. The refundable portion, also known as the Additional Child Tax Credit (ACTC) is worth up to $1,700 for each qualifying child. The CTC/ACTC decreases if your adjusted gross income exceeds $400,000 for married filing jointly, or $200,000 for all other filers.
Earned Income Tax Credit
For 2024, individuals who work without qualifying children will still be able to claim the earned income tax credit. Those without a qualifying child must be between 25-65 years of age at the end of the year, live within the United States, and cannot be claimed as a dependent by another taxpayer.
The maximum EIT credit has increased for 2024:
Dependents | 2023 Tax Year | 2024 Tax Year | % Increase |
No children | $600 | $632 | 5.33% |
One child | $3,995 | $4,213 | 5.46% |
Two children | $6,604 | $6,960 | 5.39% |
Three+ children | $7,430 | $7,830 | 5.38% |
Education Tax Breaks
There are two types of education credits, the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). See threshold limitations below:
American Opportunity Tax Credit (AOTC) | Lifetime Learning Credit (LLC) | |
Modified Adjusted Gross Income – Single | $80,000 to $90,000 | $80,000 to $90,000 |
Modified Adjusted Gross Income – Married, filing jointly | $160,000 to $180,000 | $160,000 to $180,000 |
Maximum credit | $2,500 | $2,000 |
Refundable | Yes, up to 40% of credit | No |
Eligible expenses | Course-related books, supplies, and equipment | Course-related books, supplies, and equipment only if paid to the institution as a condition of enrollment |
Years of eligibility | Can only be claimed for four years Must be within the first four years post-secondary study | No limit |
Enrollment requirements | Enrolled at least half-time | Enrolled in at least one course |
Criminal record restrictions | No felony drug convictions | No restrictions |
As with all the above strategies, we highly encourage you to discuss any strategies with your accountant before implementation. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult with your own tax, legal, or accounting advisor before engaging in any transaction.