In 2023, tax refunds took a hit, but thankfully, the tax refunds we see in 2024 may be larger, according to Mark Steber, chief tax information officer at Jackson Hewitt, who told CBS MoneyWatch that lower and middle-income Americans may see refunds as much as 10% higher than last year. In 2023, the average tax refund came in at $3,167, down 3% from 2022, according to the IRS. And although that 3% may not sound like much, the drop negatively impacted many families who were already struggling to pay their everyday bills (like groceries, rent, etc.) due to inflation.
Also in 2024, there are new tax brackets from the IRS. The standard deduction for single filers will be $14,600, a $750 increase from 2023, and for those married filing jointly, the standard deduction for 2024 is $29,200, a $1,500 increase from 2023.
What To Expect For The 2024 Tax Season
Tax season officially kicks off on January 29, 2024. Taxpayers can file anytime between Monday, January 29th, 2024, and Monday, April 15th 2024. Taxpayers also have an option to file an extension, (form 4868, which can be filed electronically) and will give you until mid-October to file your taxes.
The Child Tax Credit, Other Dependent Care Credit, And Earned Income Tax Credit For 2024
In 2023, the credit amounts for the child tax credit and the earned income tax credit reset to pre-COVID levels, which meant consumers saw less money back overall. This remains in effect for 2024, with the child tax credit coming in at $2,000 per child. There’s also the lesser-known “other dependent care” credit of $500, which applies to aging parents or older special needs children who are also dependents.
Lastly, the maximum on the earned income tax credit, which was adjusted for inflation in 2023, remains consistent for 2024: $7,430 for families with three or more children.
Student Loan Interest Deduction And Forgiveness Taxes
Given that student loan payments resumed last fall, those paying down their educational debt will be eligible to resume deducting the interest paid on those loans, as in years past. The maximum that can be deducted is $2,500, so check with your tax preparer to see what you may qualify for.
Also, while most borrowers who benefitted from student loan forgiveness in 2023 don’t need to worry about taxes in 2024, some states haven’t adopted a provision (which was part of the American Rescue Plan) that would exempt taxes on forgiven student loan debt. If you live in Arkansas, Wisconsin, Indiana, Mississippi, or North Carolina, you may need to pay state taxes on the loans you had forgiven; again, check in with your tax preparer to confirm any forms you may need to file (like a 1099-C “cancellation of debt” form) to ensure that you aren’t overpaying, and getting back as much as you can.
Other Items To Consider For Tax Season 2024
Taxpayers should always review their current taxable income and deductible expenses to plot their estimated tax position for the year. The following are some key considerations:
Working from Home Deduction: While emote work has continued going strong these last few years, the current law still does not allow workers classified as “employees” to deduct home office expenses. You must be a business owner. However, if you are a small business owner, using part of your new home “solely and exclusively” for business purposes may allow a deduction. The deduction can be based on a simplified method, $5 per square feet with a maximum of 300 square feet, or the regular method, which allows a partial deduction of certain home expenses such as utilities, insurance, mortgage interest, and real estate taxes. If electing the regular method, keep receipts and records for all expenses. Then divide the business use space (in square feet) by the total home space to determine how much to write off against your business income. You will also be able to deduct some depreciation for that space each year.
Teacher Deduction: While no windfall, in 2024, teachers can deduct $300 of qualified expenses used for work if they teach kindergarten through 12th grade at least 900 hours during the year. (This is up from $250 last year.) If a couple is married and filing jointly and both spouses teach, that limit goes up to $600.
Cryptocurrency And NFT Reporting Requirements: In 2024, taxpayers are required to report all digital asset-related income. Not reporting assets (even if they’re in a trust) could result in penalties. If you sold crypto at a loss, you may be able to deduct some of those losses and reduce your taxable income.
Donor Advised Fund: If your 2023 income has placed you in a high bracket for the 2024 tax season, then it may be time to consider donating more to charity outright, or via a donor advised fund (DAF).
With contributions from Bryan Strike, Lead, Senior Wealth Strategist at Mercer Advisors
MORE ON HERMONEY:
- What Working Remotely In a Different State Means For Your Taxes
- Tax Filing Tips for Women Who’ve Gone Through Some Stuff
- What To Do If You Can’t Pay Your Tax Bill
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