New 2025 Tax Rates and Thresholds
With the 2024 tax filing season around the corner, practitioners should also keep in mind 2025 tax numbers and rates that will impact their clients for the coming year. The…
As the 2024 tax filing season progresses, staying informed about the latest changes and updates is crucial for preparing accurate and compliant tax returns. This year brings several significant adjustments for taxpayers and tax professionals to consider. From increased standard deduction limits to new deadlines for HSA and IRA contributions, here are ten key changes and reminders for the 2024 tax season.
1) Standard Deduction Limits Increase
The 2024 standard deduction limits increased for each filing status. Single or married filing separate taxpayers may claim $14,600, head of household taxpayers are eligible for $21,900, and married filing joint and surviving spouse taxpayers can claim $29,200. Additional standard deduction amounts are still available based on age and blindness.
2) HSA and IRA Deadlines
As a reminder, taxpayers have until April 15, 2025, to contribute to Health Savings Accounts (HSAs) and Individual Retirement Accounts (IRAs) pertaining to the 2024 tax year. When making contributions between now and the April 15 deadline, taxpayers must carefully select which tax year the contribution applies to. This can be a great last-minute planning strategy.
3) Form 4136 Required Statement
Taxpayers claiming a credit for federal tax paid on fuels must attach a statement supporting the fuel tax computation to Form 4136, Credit for Federal Tax Paid on Fuels. This statement requires taxpayers to list the business’s name, employer identification number, and the make and model of the vehicle. This statement aims to eliminate taxpayers claiming the credit with no underlying business.
4) IRA Private Letter Ruling Fee Increases
The fee for requesting a private letter ruling for a late IRA rollover is increasing from $12,600 to $14,500 for requests made after February 1, 2025. Taxpayers with a gross income below $10 million pay a lower user fee. Remember, taxpayers do not need a private letter ruling if they meet the conditions to self-certify that they qualify for a waiver of the 60-day rule for retirement plan rollovers.
5) RMD Age Increases to 73
Under the Secure 2.0 Act, the required minimum distribution (RMD) age increased from 72 to 73. Taxpayers who turn 73 during 2024 must take their first RMD by April 1, 2025, and their second RMD by December 31, 2025. Different deadlines may apply for contributions to a 403(b) plan before 1987. Remember, owners of Roth accounts are no longer required to receive RMDs; however, beneficiaries of Roths are still subject to RMD rules and must receive withdrawals.
6) 1099-K Threshold Decreased
The reporting threshold for Form 1099-K, Payment Card and Third Party Network Transactions, has decreased to $5,000 in gross payments for the 2024 tax year. Taxpayers using payment apps and online marketplaces may receive these forms if transactions were processed through a business account. The sale of goods and services to friends and family members is excluded from the 1099-K reporting requirements. The 1099-K further decreases to $2,500 in gross payments starting in 2025.
7) Child Tax Credit Changes Automatically Apply
Taxpayers who claimed the Child Tax Credit before legislative changes will receive an automatic adjustment from the IRS. No additional action or amendments will be needed. However, updating internal records for the post-filed adjustments will be important. No changes have been made at the time of this posting. Additionally, the refundable portion of the Child Tax Credit is set at $1,700 for the 2024 tax year.
8) Kiddie Tax Threshold Increases
For the 2024 tax year, children with $2,600 or more investment income and other unearned income must file Form 8615, Tax for Certain Children Who Have Unearned Income. If the child’s income consists of only interest, dividends, and capital gains and totals less than $13,000, their parent can elect to include the income on their tax return. They make this election by filing Form 8614, Parents’ Election to Report Child’s Interest and Dividends. The first $1,300 of unearned income has no tax, while income between $1,300 and $2,600 is taxed at the child’s marginal rate. Income over $2,600 is taxed at the parent’s marginal rate because it is reported on Form 8615.
9) IRS Free File Options
IRS Free File is available to IRS-trusted e-file companies for taxpayers with adjusted gross income (AGI) amounts at or below a threshold, generally $84,000. If eligible, taxpayers can use one of these services in the Free File program to file their federal return free of charge. However, state offerings are limited. Paid tax preparers cannot use these programs.
10) IRS Online Offerings
The IRS suggests that all taxpayers create an IRS Online Account to maintain data, including past payments, filed returns, and other important information. Taxpayers can also make online estimated payments through their online account, reducing the risk of paper checks being lost in the mail.
Summary
As the 2024 tax season kicks off, staying informed about key updates is crucial. This year, notable changes include increased standard deduction limits, new deadlines for HSA and IRA contributions, and a higher required minimum distribution (RMD) age of 73. Additionally, the 1099-K reporting threshold has been lowered to $5,000. Other important updates involve the Child Tax Credit, Kiddie Tax thresholds, and IRS Free File options. Taxpayers are also encouraged to create an IRS Online Account for easier tax management. Keeping these updates in mind will help ensure a smooth and compliant tax filing process.
By Rachel Szeklinski, CPA
Sources
IRS Form 4136 (2024), Instructions for Form 4136 | Internal Revenue Service (irs.gov)
Internal Revenue Bulletin: 2025-1 | Internal Revenue Service (irs.gov)
Retirement plan and IRA required minimum distributions FAQs | Internal Revenue Service (irs.gov)
IRS Free File: Do your taxes for free | Internal Revenue Service (irs.gov)
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