2024 Tax Changes You Need to Know: Updates for Individuals and Businesses

As the new year approaches, it’s important for both individuals and businesses to stay informed about upcoming tax changes that could impact their financial situation in 2024. Navigating the ever-evolving tax landscape can be overwhelming, but understanding key updates can help you take advantage of new opportunities and avoid costly mistakes.

At Tax Americano, we believe that “Failing to plan is planning to fail”, especially when it comes to taxes. Whether you’re an individual filer or a small business owner,  this article will help you stay ahead of the curve by breaking down the most significant tax changes for 2024 and how to prepare for them.

  1. Adjustments to Tax Brackets and Standard Deductions

Changes for Individuals: Each year, the IRS adjusts tax brackets for inflation, which can affect how much tax you’ll owe on your income. For 2024, the tax brackets have shifted slightly higher, meaning you could pay less in taxes even if your income stays the same. This is part of the government’s annual inflation adjustment to prevent “bracket creep.”

The standard deduction has also increased:

  • For single filers, the standard deduction will rise to $14,000 (up from $13,850 in 2023).
  • For married couples filing jointly, the deduction will increase to $28,000 (up from $27,700).

These changes can offer some relief for taxpayers, but planning ahead to ensure you’re optimizing deductions and exemptions is critical. After all, “Failing to plan is planning to fail” if you don’t account for these adjustments in your tax strategy.

  1. Higher Contribution Limits for Retirement Accounts

For individuals looking to save more for retirement, 2024 brings good news with increased contribution limits for retirement accounts like 401(k)s and IRAs:

  • The annual contribution limit for a 401(k) has increased to $23,000, up from $22,500 in 2023.
  • For IRAs, the contribution limit is now $7,000 (up from $6,500), and those aged 50 and above can make an additional catch-up contribution of $1,500.

If you’re a small business owner or self-employed, contributions to a SEP IRA or SIMPLE IRA also see a slight increase. These changes are an excellent opportunity to boost your retirement savings while reducing taxable income. Start planning today to take full advantage of these higher limits, because, as we always say, “Failing to plan is planning to fail.”

  1. Expanded Clean Energy and EV Tax Credits

2024 continues the trend of encouraging investments in clean energy through enhanced tax credits. If you’ve been considering going green, now is the time to act:

  • Residential Energy Efficient Property Credit: The credit for installing solar panels, wind turbines, and other renewable energy systems in your home continues at 30% of the cost through 2032.
  • Electric Vehicle (EV) Tax Credit: You can still claim up to $7,500 for the purchase of a new electric vehicle or up to $4,000 for a qualifying used EV.

For businesses, the Investment Tax Credit (ITC) for solar energy installations remains a significant benefit, offering 30% of installation costs as a credit. However, navigating these credits can be tricky, with various qualifying rules. Consulting with professionals at Tax Americano can help ensure you don’t miss out on these opportunities, because “Failing to plan is planning to fail.”

  1. Changes to Capital Gains Tax Rates

Investors should be aware of adjustments to the capital gains tax thresholds for 2024. While the rates (0%, 15%, and 20%) remain the same, the income thresholds for these rates have increased. For example:

  • The 15% capital gains rate now applies to single filers with incomes between $45,000 and $492,000.
  • Married couples filing jointly will see the 15% rate apply to incomes between $90,000 and $553,000.

Capital gains tax can significantly affect your investment strategy, especially if you plan to sell high-value assets like stocks or real estate in 2024. Careful tax planning with a professional can help minimize your tax liability, ensuring you don’t miss out on opportunities to save.

  1. Increased Child Tax Credit and Dependent Care Benefits

The Child Tax Credit (CTC) remains a valuable benefit for families, and in 2024, it is expected to stay at $2,000 per qualifying child under the age of 17. However, income phase-out thresholds have increased, allowing more families to qualify for the full credit.

In addition, if you pay for daycare or other dependent care services, the Dependent Care Credit offers up to 35% of $3,000 of expenses for one dependent (or $6,000 for two or more), depending on your income. Planning ahead can help families take full advantage of these credits during the 2024 tax season.

  1. Retirement Distribution Rules for Businesses and Individuals

For those nearing retirement, the Required Minimum Distribution (RMD) age has increased. Starting in 2024, individuals now have until age 74 (up from 73) to begin taking RMDs from their retirement accounts. This change provides additional time to allow investments to grow tax-deferred.

For businesses, particularly those with pension plans or offering retirement accounts to employees, staying updated on RMD changes is crucial for planning payouts and ensuring compliance. Failing to plan is planning to fail—this rule applies equally to retirement planning and tax compliance.

  1. 2024 Estate and Gift Tax Exemptions

The federal estate tax exemption amount for 2024 is set to increase to $13.92 million per individual (up from $12.92 million in 2023). This means more wealth can be transferred without triggering federal estate taxes.

Similarly, the annual gift tax exclusion has risen to $18,000 per recipient (up from $17,000). If you’re planning large financial gifts or estate transfers, understanding these exemptions can help you minimize tax implications for your heirs.

Proper estate planning requires long-term vision, and partnering with a tax expert at Tax Americano ensures you make the most of these exemptions. Remember, “Failing to plan is planning to fail.”

Prepare Today with Tax Americano

The tax landscape in 2024 is filled with new opportunities and challenges for individuals and businesses alike. Whether you’re planning to maximize deductions, take advantage of increased tax credits, or manage your retirement savings, now is the time to act. At Tax Americano, we specialize in helping taxpayers navigate these changes with ease, ensuring they’re well-prepared for tax season.

Remember, “Failing to plan is planning to fail”—but with the right guidance, you’ll be set up for success. Contact Tax Americano today at 772-301-1485, to start your tax planning for 2024 and beyond.