Summary of the 2024 Tax Updates

1. General Overview

• No new federal tax bills passed in 2024 [1].

• Expansion of child tax credit and business credits passed the House but failed in the Senate [4].

• Tax Cuts and Jobs Act (TCJA) provisions are phasing out, while Inflation Reduction Act and SECURE 2.0 Act provisions are taking effect [1][3].

2. CPI Adjustments

Key Impacts:

• Adjustments based on October 2022–September 2023 CPI figures [1].

• Standard deduction increased by $750 for single filers and $400 for married filers in 2025 [1][3].

• Tax brackets adjusted upward by 5.4% [3].

Implications:

• Reduced tax liability for most filers [1].

• Child Tax Credit refundable portion increased to $1,700 [1].

• Earned Income Tax Credit (EITC) limits increased [1].

3. Changes to Tax Forms

• 1040: New checkbox for electing nonresident aliens as U.S. residents [1].

• Schedules:

  • Schedule 1: Line added for digital assets treated as ordinary income [1].

  • Schedule 2: Section added for EV credit recapture [1].

  • Schedule 3: Clarifications on Section 1341 repayments and Form 3800 updates [1].

4. SECURE 2.0 Act Updates

RMDs:

• Age increased to 73 for those born between 1951–1959 [1].

• Penalty for missed RMDs reduced to 25% (or to 10% under specific conditions) [1].

529 Plans:

• Unused funds can roll into Roth IRAs under conditions:

  • Plan must exist for 15 years [1].

  • Lifetime rollover cap of $35,000 applies [1].

5. Inflation Reduction Act Provisions

• EV Credits:

  • Requires battery components sourced from North America or partner countries [3].

  • Credit applied at point of sale; excess advances must be repaid if ineligible [1][3].

6. TCJA Phasing Out

Bonus Depreciation:

• Declining from 80% in 2023 to 60% in 2024, with full sunset by 2025 unless extended [7].

Expiring Provisions by 2025:

• Standard deduction increase and QBI deduction eliminated [7].

• Child Tax Credit reverts to $1,000 ($400 refundable) [1][7].

• SALT deduction cap and AMT exemptions revert to pre-TCJA levels [7].

7. Additional Updates

• Social Security Tax Limit: Increased to $168,600 in earnings for payroll tax [1].

• Gift Tax Exclusion: Raised to $18,000 annually; lifetime exclusion at $13.61 million [1].

• Capital Gains Threshold: No tax on incomes up to $47,025 (single filers) [3].

8. Implications for Taxpayers

• Higher refunds expected due to CPI adjustments and increased credits [1].

• Enhanced benefits for EITC recipients and compliance incentives for RMD rules [1].

9. Future Considerations

• Significant changes anticipated in 2025 as TCJA sunsets, with uncertainty about extensions or replacements [2][7].

Citations

[1] 2024 Tax Changes: What You Need to Know – TaxAct Blog https://blog.taxact.com/2024-tax-changes/