2024 Tax Season: What to Expect and How to Prepare
The tax season is the time of the year when taxpayers file their tax returns to the Internal Revenue Service (IRS) and pay any taxes they owe. The tax season usually starts in late January and ends on April 15, unless there is a federal holiday or a weekend that extends the deadline. In 2024, the tax season will be for the income and expenses of the year 2023.
The tax system in the United States is complex and constantly changing. Every year, there are new tax laws, regulations, forms, and rates that affect how much tax you owe and how you can reduce your tax liability. Therefore, it is important to stay updated on the latest tax news and plan ahead for the upcoming tax season. In this blog post, we will discuss some of the key changes and tips for the 2024 tax season.
What are the changes for the 2024 tax season?
There are several changes that will affect the 2024 tax season, some of which are:
Bracket creep
Bracket creep is the phenomenon where taxpayers are pushed into higher tax brackets due to inflation and income growth. This means that they pay more tax even if their real income does not increase. To prevent this, the IRS adjusts the income tax brackets every year based on the inflation rate.
For the 2024 tax season (filing 2023 tax returns), the income tax brackets will be slightly higher than the 2023 tax season (filing 2022 tax returns), meaning that you will pay less tax on the same amount of income. For example, for the 2023 taxes, single filers in the 10% tax bracket can earn up to $11,000, which is an increase from the previous year’s maximum of $10,275. In 2024, this bracket will increase to a maximum of $11,600.
Contribution limits
Contribution limits are the maximum amounts that you can contribute to certain tax-advantaged accounts, such as individual retirement accounts (IRAs), 401(k) plans, health savings accounts (HSAs), and flexible spending accounts (FSAs).
These accounts allow you to save money for retirement, health care, or other purposes while reducing your taxable income. For the 2024 tax season, the contribution limits for some of these accounts will increase, allowing you to save more and pay less tax. For example, the contribution limit for IRAs increased from $6,000 in 2022 to $6,500 in 2023. Those aged 50 or older have a top-up amount.
Therefore, as you plan to file next year, make sure to max your contribution limits so you can save more money on taxes. You can contact a tax pro like me to plan your taxes and implement these and other tax strategies.
Tax forms
Tax forms are the documents that you use to report your income, deductions, credits, and taxes to the IRS. Every year, the IRS updates the tax forms to reflect the changes in the tax code and the tax rates. For the 2024 tax season, there will be some new and revised tax forms that you may need to use, depending on your situation. For example, there will be a new Form 1099-NEC, which will replace Form 1099-MISC for reporting nonemployee compensation, such as payments to independent contractors, freelancers, or gig workers.
How to prepare for the 2024 tax season?
Preparing for the tax season can be stressful and overwhelming, but it can also save you time, money, and hassle. Here are some of the tips that can help you prepare for the 2024 tax season:
Organize your records
One of the first steps to prepare for the tax season is to organize your records, such as income statements, expense receipts, bank statements, investment statements, mortgage statements, charitable donations, medical bills, and any other documents that are relevant to your tax situation. You can use a filing system, a spreadsheet, or a software program to keep track of your records and categorize them by income, deductions, credits, and taxes. This will help you to fill out your tax forms accurately and efficiently and to avoid missing any important information or documents.
Review your filing status
Your filing status is one of the factors that determine your tax liability, your eligibility for certain tax benefits, and the tax forms that you need to use. Your filing status depends on your marital status and your dependents. There are five filing statuses: single, married filing jointly, married filing separately, head of household, and qualifying widow(er) with dependent child.
You should review your filing status every year and choose the one that best suits your situation and gives you the lowest tax liability. For example, if you are married, you may want to compare the tax implications of filing jointly or separately, depending on your income, deductions, credits, and other factors.
Estimate your taxes
Estimating your taxes is a way to get an idea of how much tax you owe or how much refund you can expect for the 2024 tax season. You can use a tax calculator, tax software, or a tax professional to estimate your taxes based on your income, deductions, credits, and taxes. This will help you to plan your budget, adjust your withholding or estimated tax payments, and avoid any surprises or penalties when you file your tax return.
Maximize your deductions and credits
Deductions and credits are the two ways that you can reduce your taxable income and your tax liability. Deductions are the expenses that you can subtract from your income, such as mortgage interest, state and local taxes, charitable contributions, medical expenses, and more. Credits are the amounts that you can subtract from your tax, such as child tax credit, earned income tax credit, education credit, and more.
You should review the eligibility and the rules for the deductions and credits that apply to your situation and claim them on your tax return. You should also keep in mind that some deductions and credits are subject to limitations, phaseouts, or alternative minimum tax (AMT).
File your tax return on time
The last and most important tip to prepare for the 2024 tax season is to file your tax return on time. The deadline for filing your tax return is April 15, 2024, unless you request an extension or there is a federal holiday or a weekend that extends the deadline. If you file your tax return late, you may face penalties and interest charges from the IRS. If you are expecting a refund, you may also delay receiving your money. Therefore, you should file your tax return as soon as possible, preferably electronically, to avoid any problems and to get your refund faster.
Frequently Asked Questions
1. Will tax rates change in 2024?
No, the tax rates for the 2024 tax season will be the same as the 2023 tax season. However, the income tax brackets will be adjusted for inflation, meaning that you will pay less tax on the same amount of income.
2. Will I pay more tax in 2024?
It depends on your income, deductions, credits, and taxes. If you are eligible for the child tax credit, for example, you may get a larger tax refund in 2024. You may also get a larger tax refund if you increase your contributions to tax-advantaged accounts, such as IRAs, 401(k)s, HSAs, and FSAs, or if you claim more deductions and credits that reduce your taxable income and your tax liability.
3. What is total taxable income?
Total taxable income is the amount of income that is subject to tax after subtracting your adjustments, deductions, and exemptions. Adjustments are the expenses that you can deduct from your gross income, such as student loan interest, alimony payments, IRA contributions, and more. Deductions are the expenses that you can deduct from your adjusted gross income, such as the standard deduction or the itemized deductions. Exemptions are the amounts that you can deduct for yourself and your dependents, such as the personal exemption and the dependency exemption. However, the personal and dependency exemptions have been suspended for the tax years 2018 to 2025, meaning that you cannot claim them on your tax return. To calculate your total taxable income, you can use the following formula:
Total taxable income = Gross income – Adjustments – Deductions – Exemptions
