Before I get you thinking about the new year and being tax savvy in it, let’s first address the 2023 tax filing season which is fast approaching.
It’s a good idea to go ahead and get on my schedule now to handle your 2023 tax filing. Though the IRS doesn’t officially start receiving 1040 forms until the end of January/early February, it doesn’t mean you have to wait to start sorting through your paperwork or wait to make a deadline for yourself that’s at the beginning of tax season rather than the end.
And some really good news looking back on 2020 and 2021 (if you’re still paying off debts from those years), the IRS is waving the failure to pay penalties on assessed taxes less than $100,000. If you made payments toward your balance owed or already paid these in full, a credit will automatically be applied to any other tax year you still owe on — otherwise you’ll receive a refund.
Now, let’s talk about this year. Yes, tax season is coming and you’re probably thinking about 2023, but as your trusted Oklahoma City tax professional, I want to help you start planning for 2024 too. Because some tax changes are now in effect, and it should influence how you approach the coming year.
So let’s jump into that today, and then in the coming weeks, I’ll be talking more about what you need to gather for your upcoming tax appointment.
2024 Tax Credits & Deductions for Oklahoma City Taxpayers
“The way to get started is to quit talking and begin doing.” – Walt Disney
As we usher in 2024, goals may be on our minds, but our wallets are giving the side-eye to the impending tax season. Though you’re probably more focused on the 2023 tax filing, which begins in little less than a month, it’s also the right time to start thinking ahead beyond that.
The IRS has made some updates to various filing categories — specifically credits, deductions, and inflationary adjustments for the 2024 tax season.
So, let’s cut to the chase and dig into those updates. The IRS has made a few noteworthy moves for 2024…
Standard Deductions & Tax Rate Increases
The standard deductions are seeing bumps, thanks to IRS adjustments for inflation in 2024.
- For married couples filing jointly in tax year 2024, the standard deduction has increased to $29,200. That’s a $1,500 increase from what you can claim for 2023’s taxes.
- Singles have a bumped-up deduction of $14,600, marking a $750 increase.
- Heads of households get a substantial $21,900, up by $1,100 from the previous year.
Marginal tax rates for 2024 remain the same, with the top rate at 37% for individual single taxpayers with incomes over $609,350 (or $731,200 for married couples filing jointly).
Also, the AMT exemption (Alternative Minimum Tax) amount for 2024 is $85,700 ($133,300 for married couples filing jointly), signaling an increase from the $81,300 in 2023. Keep in mind, it starts to phase out at $609,350 for individuals (phase out at $1,218,700 for married couples filing jointly).
Taking Credit
Tax credits are also seeing a boost in 2024, which should help offset rising costs for you.
- The Earned Income Tax Credit (EITC): This credit increases to $7,830 for qualifying folks with three or more qualifying children (up almost $400 from 2023).
- The Child Tax Credit (CTC): The CTC is up to $2,000 per qualifying child. The child must be 17 or under (or 24 if they’re full-time students) and living in your house for at least half the year to qualify.
- Adoption Credit: The maximum credit allowed for adoptions in 2024 is up to $16,810, increased from $15,950 in 2023.
- Estate Tax Exclusion: Estates of decedents who die in 2024 have a basic exclusion amount of $13,610,000, increased from $12,920,000 in 2023.
- Gift Tax Exclusion: The annual exclusion for gifts increases to $18,000 for calendar year 2024, up from $17,000 in 2023.
Medical Expense Deductions & Other Credits
If you’ve spent more than 7.5 percent of your AGI on medical expenses, there are some deductions you can snag including prescription drugs, hospital visits, home improvements for health, dental and vision costs, and even travel expenses to medical spots.
So, if your AGI is $50,000 and you have $10,000 in total deductible medical expenses, 7.5% of $50,000 is $3,750. You can deduct $6,250 of medical expenses as part of your itemized deductions.
This does not include elective cosmetic procedures, though.
And if you’re a freelancer or independent contractor – you can likely deduct your long-term care insurance and health insurance premiums.
Other Highlights
Now, let’s fast-track through some other credits and deductions you can optimize for in 2024.
Education Credits. If you’re investing in education, credits like the American Opportunity Credit can ease the financial load of post-secondary education expenses.
Energy-Efficient Home Upgrades. Sprucing up your Central Oklahoma home? There are tax credits for that – from upgrading windows to installing solar panels..
Saver’s Credit. If you’re saving for retirement and you fall in the low-to-moderate income bracket, the Saver’s Credit can give you a little extra boost when you contribute to retirement accounts (up to $1,000 credit or $2,000 if filing jointly).
As you navigate the tax landscape for 2024, keep these updates in your toolkit. And we’ll keep you posted in terms of developments for these so you can make the most of each opportunity.
And make sure to stay tuned for more helpful info about 2023 tax filing in the coming weeks.
Ready for 2024,
Robin Harris
