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2023 Tax Year Changes for the 2024 Tax Filing Season

2023 Tax Year Changes for the 2024 Tax Filing Season

Each year brings changes to the tax code that will impact the amount you owe. Keeping up with these changes is a challenge, even for the professionals. Once again, the new tax filing season brings changes that you need to be aware of to maximize your refund or minimize the amount you owe.

Tax Brackets and Standard Deductions

This typically changes every year, and the amounts are generally minimal. 2023 was no different. The standard deduction amounts were increased to account for inflation. Married couples get $27,700 plus $1,500 for each spouse age 65 or older. Singles can claim a $13,850 standard deduction — $15,700 if they're at least 65 years old. Head-of-household filers get $20,800 for their standard deduction plus an additional $1,850 once they reach age 65.

The tax brackets were widened by a few hundred to a few thousand. Your tax rate (the percentage of your income you pay in taxes) is based on what income range you are in. For example, if you’re single and your income is $75,000, then you’re in the 22% tax bracket. But that doesn’t mean your tax rate is a flat 22%. Instead, part of your income is taxed at 10%, another part at 12%, and the last part at 22%.  For 2023, the tax brackets are:

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2023 Tax Brackets and Rates for Single Filers, Married Couples Filing Jointly, and Heads of Households

Tax Deductions and Credits to Consider for Tax Season 2024

There is a big difference between deductions and credits. While both help lower your tax bill, deductions are used to reduce the amount of taxable income. Deductions net you a savings of what would have been paid in tax on the deduction amount. On the other hand, tax credits are amounts actually subtracted from your tax bill. Here are some of each you might be able to take in 2024.

1. Charitable Deductions

You can deduct charitable contributions made during tax year 2023 as long as you itemize your deductions and donate to qualified organizations. The limit for charitable deductions is 60% of your adjusted gross income (AGI).

2. Medical Deductions

If you had a lot of medical expense, you might be able to deduct some if you itemize your deductions. You can deduct any medical expenses above 7.5% of your adjusted gross income (AGI).  For example, if your AGI was $100,000, you can deduct out-of-pocket medical expenses above $7,500 in tax season 2024.

3. Business Deductions

If you’re self-employed, there are a bunch of deductions you can claim on your tax return—including travel expenses and the home office deduction if you use part of your home for business purposes.

4. Earned Income Tax Credit (EITC)

This one’s a biggie. The EITC is a refundable credit designed to help out low- and middle-income households. To qualify for the credit in tax season 2024, a single filer with no children must have an AGI below $17,640, while the cap for a married couple with three or more children is $63,398.

5. Child Tax Credit

The child tax credit (CTC) lets you credit up to $2,000 per dependent child under the age of 17. The income limit is $400,000 for married filing jointly and $200,000 for all the others.

6. Child and Dependent Care Credit

The child and dependent care credit is a credit that allows taxpayers to offset some of the costs of paying for services like babysitters, day care and in-home caregivers for older dependents.

7. Education Credits

There are two credits associated with education. First, the American opportunity tax credit (AOTC) is a credit that pays for education expenses for students in the first four years of college. You can claim up to $2,500 per student. Another education credit is the lifetime learning credit (LLC) and it covers up to $2,000 in qualified educational expenses per return. While you can only take advantage of the AOTC for undergrad expenses, you can reap the benefits of the LLC for expenses related to all kinds of educational opportunities—from degree programs to technical classes to improving job skills. You can claim both the AOTC and the LLC on your tax return—but not for the same student or the same expenses.

8. Inflation Reduction Act Credits

While the bill that was signed into law in 2022 primarily benefits big business, there are a couple of potential credits for individuals. First, the Inflation Reduction Act offers a credit up to $7,500 to certain people who’ve recently purchased a new or used electric vehicle.  It also offers a credit for home energy improvements like solar power generators and water heaters.

There are far too many other changes to cover. Be assured that your tax professionals at Sloan know the rules and are here help you navigate the changes.  We are open year-round and we are happy to assist in preparing for the upcoming season. Plus, our tax professionals are here full time to ensure you get the best service possible and the support you need - when you need it.