As Americans work to file their tax returns and maximize their refunds, it’s crucial to stay informed about the key updates that could impact this year’s filings. Several adjustments have been introduced for the 2024 tax season, from modifications to tax credits to shifts in reporting requirements.
The IRS officially began accepting 2024 tax returns on January 27, marking the start of tax season. With a new administration in place, leadership changes at the IRS, and discussions surrounding the formation of a potential External Revenue Service, taxpayers may see more transformations in the near future. For now, here are seven major tax updates to be aware of before filing your return.
1. Changes to the Child Tax Credit
Families claiming the Child Tax Credit (CTC) will see a slight increase in the refundable portion this year. While the maximum credit remains $2,000 per qualifying child under 17, the refundable amount has risen from $1,600 to $1,700. This means eligible families can receive up to $1,700 per child even if they don’t owe taxes.
However, there are income limits to consider. The credit begins to phase out for individuals earning over $200,000 and for married couples filing jointly who earn more than $400,000. Additionally, no advance monthly payments will be issued, unlike in previous years.
2. New 1099-K Reporting Threshold
The IRS has revised its 1099-K reporting rules, affecting those who receive payments through third-party platforms like Venmo, PayPal, eBay, and Etsy. Initially, the agency planned to enforce a $600 reporting threshold, but this change has been delayed. Instead, for 2024, transactions totaling $5,000 or more must be reported, regardless of the number of transactions.
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This adjustment means that more taxpayers may receive Form 1099-K and should be prepared to report income from these sources accurately.
3. Expanded Free Tax Filing Options
Eligible taxpayers can file their federal tax returns at no cost through the IRS Free File program, which is now available to individuals earning $84,000 or less—a $5,000 increase from last year’s threshold. The system connects users with IRS-approved tax preparation software and has been accessible since January 10.
Additionally, the IRS has expanded its Direct File pilot program, now available in 25 states, up from 12 last year. This initiative allows approximately 30 million taxpayers to file directly with the IRS, reducing reliance on paid tax software and saving money.
4. Adjustments to Federal Tax Brackets
The federal income tax brackets have been adjusted for inflation, potentially lowering tax bills for some filers. The seven tax rates—10%, 12%, 22%, 24%, 32%, 35%, and 37%—remain unchanged, but the income thresholds for each bracket have increased.
For instance, an individual earning $48,000 in 2023 may have been in the 22% tax bracket, but in 2024, they could fall into the 12% bracket, reducing their tax liability. These adjustments are designed to offset the effects of inflation and help taxpayers keep more of their earnings.
5. Higher Standard Deduction
The standard deduction, which reduces taxable income for those who don’t itemize deductions, has increased for the 2024 tax year. The new amounts are:
- $14,600 for single filers and married individuals filing separately
- $29,200 for married couples filing jointly
- $21,900 for heads of household
These increases provide tax relief to millions of Americans by lowering their taxable income, ultimately leading to potentially larger refunds.
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6. Extended Tax Deadlines for Disaster-Affected Areas
Taxpayers in areas impacted by natural disasters have been granted deadline extensions by the IRS. Severe weather events, including Hurricane Helene and devastating wildfires in California, prompted the agency to offer more time for affected individuals and businesses to file their returns without penalties.
Extended deadlines apply to specific counties in states such as:
- California
- Texas
- Florida
- New York
- Alabama
- South Carolina
- Virginia
Taxpayers in these areas should check IRS guidelines to confirm eligibility for extended filing deadlines.
7. Little-Known Tax Credits to Save Money
Many Americans miss out on valuable tax credits that could significantly reduce their taxable income or increase refunds. One example is a lesser-known credit that can result in thousands of dollars in savings. Taxpayers should explore all available credits and deductions to maximize their returns.
Additionally, the IRS has announced that over 8 million taxpayers have already received their refunds. To avoid processing delays, ensure that all information is accurate and take advantage of e-filing and direct deposit options.
Final Thoughts
With one month already behind us in tax season, staying informed about IRS updates and changes to tax laws is essential. Understanding these key tax adjustments can help taxpayers file more efficiently, claim the maximum benefits, and avoid potential pitfalls. As new policies and IRS initiatives emerge, being proactive with tax planning can make a significant difference in your refund or tax bill this year .
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