Explore 3 key resources designed to help accountants this tax season
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| Planning for 2024 tax filings: What’s new for individuals? |
| Planning for 2024 tax filings: What’s new for businesses? |
| Tax provisions and incentives for businesses |
| Resources for the 2024 tax season |
As we approach the end of 2024, the tax landscape continues to evolve with significant legislative changes that demand the attention of accountants and tax professionals. The introduction of the Tax Relief for American Families and Workers Act of 2024, among other updates, presents new challenges and opportunities that will influence year-end tax strategies for both individuals and businesses.
In this blog, we will explore a few of these updates and provide insights and resources to help you provide strategic, informed advice to your clients and navigate the 2024 tax return season with success.
Planning for 2024 tax filings: What’s new for individuals?
As we approach the 2024 tax season, it’s crucial for individuals to stay informed about the latest updates and changes that could impact their financial planning and tax filings. The upcoming year brings several significant adjustments to retirement accounts, tax credits, and other financial considerations.
From penalty-free withdrawals for domestic abuse victims and those facing emergencies to increased catch-up contributions for retirement savings and new rules for Roth accounts, these changes offer both challenges and opportunities for taxpayers.
Understanding these updates will be essential for making informed decisions and optimizing your financial strategy for the year ahead.
- Penalty free withdrawals from retirement accounts. Domestic abuse victims under age 59 ½ may take up to $10,000 in penalty free withdrawals from retirement accounts. Individuals with an emergency can take a penalty free withdrawal up to $1,000.
- Increased catch-up retirement contributions. IRA catch-up contributions are indexed for inflation beginning in 2024. In 2025, the 401(k) catch up contribution amount increases from $7500 to $10,000 for workers aged 60 to 63.
- Some catch-up contributions must be made to a Roth account. Beginning in 2024, taxpayers with income of $145,000 or more must make any catch-up contributions to a Roth or Roth 401(k) account. Also beginning in 2024, individuals with Roth 401(k)s don’t need to take RMDs.
- Leftover money in a 529 plan. Leftover money in a 529 plan can be rolled over tax free into a Roth IRA. Restrictions apply.
- Increased RMD age. RMD age remains age 73 in 2024 and increases gradually to age 75 in 2033.
- Enhanced saver’s credit. The qualifying income limit increases to $76,500 for Married filing jointly $38,250 for others).
- Student loan relief. Employer matching retirement plan contributions can be used to help pay off student loans.
- The Lifetime Learning Credit. The Lifetime Learning Credit is phased out for taxpayers with modified adjusted gross income exceeding $90,000 ($180,000 for joint returns).
- Qualified charitable distribution cap. IRA owners can transfer up to $105,000 tax free to a charity.
Staying informed about these changes will enable you to offer strategic advice tailored to each client’s unique circumstances, from optimizing retirement savings to managing educational expenses and charitable contributions.
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Planning for 2024 tax filings: What’s new for businesses?
2024 has seen some significant tax legislation that, if enacted in its current form, would impact the end-of-year tax strategy. Understanding this legislation and how it might affect 2024’s tax obligations is essential for making informed tax planning decisions.
One of the most notable legislative proposals this year is the Tax Relief for American Families and Workers Act of 2024.
For businesses, the bill would restore immediate expensing for U.S.-based research and development (R&D) investments instead of amortizing such expenses over five years.
Full and immediate expensing for investments in machinery, equipment, and vehicles would also be restored, and the amount of investment that small businesses could immediately write off would increase to $1.29 million.
The bill also addressed the treatment of business interest expense and bonus depreciation.
Without additional laws, the bonus depreciation for most eligible business assets placed in use in 2024 will decrease to 60%, compared to the current 100% in 2022 and 80% in 2023. However, in 2024, a greater number of taxpayers will be able to deduct interest on business loans as the income threshold for small taxpayers rises to $30 million.
Tax provisions and incentives for businesses
In 2024, businesses can take advantage of several tax provisions and incentives designed to encourage investment and growth. These provisions include significant updates to bonus depreciation and business interest deductions.
Bonus depreciation
For 2024, a first-year bonus depreciation deduction falls to 60% of the adjusted basis of depreciable property is allowed for qualified property acquired and placed in service during the year. Qualifying property includes:
- Tangible property depreciated under MACRS with a recovery period of 20 years or less
- Most computer software
- Qualified film
- Television
- Live theatrical productions
- Water utility property
Possible higher tax rates next year might make some businesses want to defer placing bonus-depreciation eligible property into service until next year or to opt out of bonus depreciation on their tax return for this year. However, taxpayers should remember that under current law the bonus depreciation deduction falls into:
- 60% for property placed in service in 2024
- 40% for property placed in service in 2025
- 20% for property placed in service in 202
- 60% for property placed in service in 2027
Business deductions
For 2024, specified service businesses qualify for the QBI deduction if their taxable income is less than:
- $191,950 for single and head-of-household filers
- $383,900 for joint filers
- $191,950 for separate filers (for 2025, projected to be $197,300, $394,600, and $197,300, respectively).
The NOL carryover threshold amount is $610,000 for 2024 ($626,000 in 2025) for joint filers and $305,000 ($313,000 in 2025) for all other filers.
The Qualified Small Business Payroll Tax Credit for Increasing Research Activities can offset up to $500,000 of a small business’ payroll taxes.
Resources for the 2024 tax season
As we navigate the complexities of the 2024 tax season, it’s clear tax and accounting professionals must stay updated on legislative changes.
The Tax Relief for American Families and Workers Act of 2024 and other significant updates present both challenges and opportunities that require careful analysis and strategic planning. By leveraging the resources and insights, tax and accounting professionals can offer informed guidance to clients, optimizing their tax strategies and ensuring compliance.
Looking ahead, remember that proactive planning and a thorough understanding of these changes will empower you to navigate the complexities of 2024 with confidence and precision.
Utilize our resources below and navigate this tax season with success!
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