Big Changes in Tax Deductions and Credits: How They Affect You?

The IRS has announced important changes for the 2024 tax season that could impact many taxpayers.

With the tax deadline approaching on April 15, it’s crucial to be aware of these updates to avoid penalties and maximize refunds.

The IRS began accepting tax returns on January 27, encouraging taxpayers to prepare early.

Increase in Standard Deduction

One of the most significant changes for the 2024 tax year is the increase in the standard deduction. The new amounts are as follows:

• Single or Married Filing Separately: $14,600
• Head of Household: $21,900
• Married Filing Jointly or Qualifying Surviving Spouse: $29,200

These increases are higher than the 2023 amounts, where single taxpayers and married individuals had a standard deduction of $13,850, and heads of households had $20,800.

This adjustment means that more taxpayers might benefit from the standard deduction instead of itemizing their expenses.

Child Tax Credit Updates

Taxpayers eligible for the Child Tax Credit (CTC) should file their 2024 returns as soon as possible.

If Congress makes changes to CTC guidelines later, the IRS will automatically adjust filed returns, requiring no additional action from taxpayers.

For 2024, the CTC remains as follows:

• Base Amount: $2,000 per qualifying child
• Phase-Out Income Limits: $200,000 for single filers and $400,000 for joint filers
• Qualifying Child: Must be under 17 years old by the end of 2024

Additional Child Tax Credit (ACTC) Changes

The ACTC has increased to $1,700 per qualifying child for the 2024 tax year.

Notably, residents of Puerto Rico no longer need three or more qualifying children to claim the ACTC. They now qualify if they have at least one eligible child.

The IRS has also stated that refunds for returns claiming the ACTC will not be issued until mid-February 2025. This delay applies to the entire refund, not just the portion related to the ACTC.

Earned Income Tax Credit (EITC) Adjustments

For 2024, taxpayers without a qualifying child must be at least 25 years old but under 65 by the end of the year to claim the EITC.

For joint filers, at least one spouse must meet this age requirement. More details can be found in the Instructions for Schedule 8812 (Form 1040).

Adoption Credit Updates

The Adoption Credit and the exclusion for employer-provided adoption benefits are set at $16,810 per eligible child for 2024.

This credit phases out for taxpayers with a modified adjusted gross income above $252,150 and is fully phased out at $292,150 or higher. For more details, refer to Form 8839 and its instructions.

Clean Vehicle Credit

Taxpayers claiming the Clean Vehicle Credit must report it using Form 8936 and Schedule 3 (Form 1040), line 6f. Additional guidance is available in Form 8936, Clean Vehicle Credit.

Previously Owned Clean Vehicle Credit

A tax credit is also available for eligible previously owned clean vehicles purchased and placed in service after 2022. Taxpayers should use Form 8936, Clean Vehicle Credit, for further instructions.

What to Do Next?

The IRS encourages taxpayers to review these changes and file their tax returns as early as possible.

Preparing in advance will help avoid penalties and delays, especially for those claiming the ACTC or other credits. The deadline for submitting and paying individual tax returns is April 15 nationwide.

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Where to Find More Information?

For more details on these changes, including tax credits and deductions, refer to Publication 17, Your Federal Income Tax (For Individuals).

The IRS website also offers detailed instructions and forms to help taxpayers navigate the new rules.

Final Reminder

Taxpayers should pay close attention to these updates to ensure accurate filing and avoid penalties.

With the deadline fast approaching, staying informed and prepared is crucial for a smooth tax season.

Reference

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