Tax Planning Series: Key Updates for 2024 Taxes and Year-End Tips
As part of our Tax Planning Series, we’re diving into important updates and strategies to help you prepare for the 2024 tax season. From inflation adjustments to tax brackets and deductions to special credits and end-of-year planning opportunities, Zach Kanady, supervisor at HHM CPAs, covers these important topics and more in a Q&A below:
Are there any inflation adjustments to the Federal Income Tax Rate Brackets, standard deductions, etc. from 2023 to 2024?
The IRS makes inflation adjustments each year to the standard tax brackets and other limits. This year the increase was about 5% across the board which is a smaller increase compared to last year’s 7%. For example, the standard deduction increased from $13,850 to $14,600 for single filers. These amounts are doubled for married filing jointly taxpayers. Similar adjustments were made to the self-employment tax limits and the tax brackets.
What are the Hurricane Relief areas and extensions?
With the recent hurricanes, the IRS has come out with filing relief and payment relief for residents and businesses in specific affected areas for the 2023 tax returns. The relief currently applies to the entire state of Alabama, Georgia, North Carolina and South Carolina, as well as certain counties within Florida, Tennessee and Virginia. In general, this relief postpones certain filing and payment deadlines to May 1, 2025. Check with your accounting professional for details.
What are some casualty loss deductions that could be claimed from the hurricanes?
For individual filers, deductions can be claimed for loss of property that is not covered by insurance. The IRS specifies that the damaged property has to be in an official federally-declared disaster area to qualify. If insurance only covers part of the cost to repair the property, the additional amount over the insurance proceeds may be eligible to be deducted as a casualty loss.
What are some of the important green-energy tax credits to be aware of?
The main change in 2024 is the addition of a $4,000 credit for eligible used electric vehicles. In the past, the only vehicles that were eligible were new vehicles. There are point of sale credits that can be included in the deal at a car dealership in order to take the credit at the time of purchase.
Are there any changes to the bonus depreciation rules for 2024?
In 2024 the allowed bonus depreciation % decreased from 80% to 60% and unless there are changes by the new administration the % will continue to decrease 20% per year until it is completely eliminated.
What are some year-end items clients should be thinking about completing before December 31st to reduce their tax liability?
An important focus this year, especially for business owners is gifting. Recent economic struggles have brought some business valuations down. With the lifetime gifting exclusions at an all-time high and the potential decrease at the end of 2025 the time to gift is now. The new administration may delay this decrease in the gift limitation, but that does not change the fact that low business valuations will allow taxpayers to gift larger portions of their companies now that may increase in value in the future. This is very important and complex so make sure to reach out to your CPA to see if this is the right move for your estate and tax planning.
What are some other items to consider before year end?
- Tax Loss harvesting
- Retirement Contributions
- Charitable Giving
We’ll be sharing more tax planning tips and resources on our resources page at hhmcpas.com/resources.
Watch the full interview with Zach Kanady below: