As 2023's filing season is wrapping up and we are well into the year, I want to share some tax-wise updates for the 2024 tax filing season. Tax season is the time to report what happened in the past year, however, the time to make smart moves is during the year, before or after tax season. This allows you to take advantage of available tax-smart opportunities such as deductions, credits, and utilizing retirement accounts.
To help you prepare, I will share 5 powerful ways you can impact your tax situation this year:
Updates to Tax Deductions.
There is an increase in the standard deduction in 2024. The deduction for Single filers increased to $14,600, Married Filing Jointly increased to $29,200 and if you are over 65 your deduction has increased to $32,300.
This higher standard deduction is in effect until the end of 2025 when the TCJA (Tax Cuts and Jobs Act) will sunset. We keep our clients posted on all tax law changes and adjust our strategy accordingly.
Increase to HSA Contributions.
Taxpayers with high-deductible health plans can make a deductible contribution to an HSA account. The increased contribution amounts for 2024 are $4,150 for Single filers, $8,300 for Families, plus an additional $1,000 for those 55 or older.
If you are on Medicare, HSA contributions are not allowed but you can pay premiums with an existing HSA account.
Increase to Retirement Contribution Maximums.
Although not tax-deductible, ROTH IRAs offer tax-deferred growth and qualified distributions are tax-free! The maximum contribution is $7,000 for anyone under 50 and $8,000 for anyone 50 or older. The phaseout increased to $146k - $161k for Single filers and $230k - $240k for Married Filing Jointly.
401k maximums are $23k for anyone under 50 and $30,500 for those 50 or older.
Taxpayers with a ROTH 401k feature can contribute to both a ROTH 401k and ROTH IRA to maximize retirement savings for a potential combined max contribution of $69k.
Among the expanded retirement savings opportunities, the Secure Act 2.0 allows unused 529 accounts (15 years or older) to be converted to a ROTH IRA subject to the ROTH max for the year, up to a lifetime limit of $35k.
Updates to Credits.
Originally Residential Energy Tax Credits were available for one year only however thanks to tax law updates, these credits are expanded to years 2023-2032. If you make qualified energy-efficient improvements to your primary home in those years, you may qualify for a tax credit of 30% of qualified expenses up to $3,200.
The credit has no lifetime dollar limit. You can claim the maximum annual credit every year that you make eligible improvements until 2033.
Let's talk about the Residential Clean Energy Credit. Solar water heating, solar electricity, fuel cells, small wind, and qualified battery storage technology have expanded through the years 2023-2034.
There have also been expansions to electric vehicle credits, on both new and used vehicles.
State Taxes.
Most states offer property tax breaks for homeowners over 65. Check with your county assessor to see if you qualify for these tax breaks.
What does it mean to be Tax-Wise?
There is a tax implications to every financial decision you make. At TimeWise Financial, we consider tax consequences in our investment management and financial planning processes.
If you are an investor who would like tax planning help, I would love to speak with you.
Schedule A 15-Minute Call With Me!
https://russellinvestments.com/Publications/US/Document/Tax_Facts_Figures.pdf
https://www.irs.gov/credits-deductions/home-energy-tax-credits