Are you up-to-date with the latest tax laws? If not, don’t worry, you are not alone. Tax laws change regularly, and it can be hard to keep up with them. In this blog post, we will help clarify the newest tax laws, so you can file your taxes with confidence in 2024.
What are the new tax laws?
The new tax laws that will affect your 2024 tax filings are the Tax Cuts and Jobs Act (TCJA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act. These laws contain broad changes to the tax code and impact things like individual income tax rates, deductions, and credits.
## Tax Brackets
Tax brackets dictate how much tax you owe based on your income. The TCJA created new tax brackets, which are in effect until 2025. The new brackets are:
- Single: 10%, 12%, 22%, 24%, 32%, 35%, and 37%
- Married Filing Jointly: 10%, 12%, 22%, 24%, 32%, 35%, and 37%
- Married Filing Separately: 10%, 12%, 22%, 24%, 32%, 35%, and 37%
- Head of Household: 10%, 12%, 22%, 24%, 32%, 35%, and 37%
💡Tip: Your income level will determine which tax bracket you fall into. Be sure to use the correct bracket when filing your taxes.
## Standard Deductions
A standard deduction is a specific amount that reduces your taxable income. The TCJA increased the standard deduction for all taxpayers. In 2024, the standard deduction will be:
- Single: $13,800
- Married Filing Jointly: $27,600
- Married Filing Separately: $13,800
- Head of Household: $20,700
🚨Highlight: If your itemized deductions are less than the standard deduction amount, you should take the standard deduction instead.
## Itemized Deductions
Alternatively, you can deduct individual expenses from your taxes, called itemized deductions. The TCJA made significant changes to the itemized deductions you can take, including:
- Medical and Dental Expenses: 7.5% of your adjusted gross income (AGI) for 2024.
- State and Local Taxes: Limited to $10,000.
- Mortgage Interest: Limited to interest on $750,000 of debt for homes purchased after December 15, 2017.
- Charitable Contributions: Increased to 60% of your AGI.
## Tax Credits
Tax credits work differently than deductions. They are direct reductions of the amount of taxes you owe. There are several tax credits available to taxpayers, including:
- Child Tax Credit: Up to $2,000 per qualifying child.
- Earned Income Tax Credit: Up to $6,660, depending on your income and family size.
- Education Credits: American Opportunity Credit and Lifetime Learning Credit.
💰Highlight: Tax credits can be beneficial since they directly reduce the amount of taxes you owe, compared to deductions that only reduce your taxable income.
## Conclusion
Understanding the new tax laws can be challenging, but hopefully, this blog post has helped make things clearer for you. Remember to check that you are filing under the correct tax bracket, itemizing your deductions correctly, and taking advantage of all tax credits available. Don't forget, if you have questions or need help with your taxes, there are always professionals that can assist you.
So, next time you need to file your 2024 taxes, be sure to follow these guidelines, and you will likely be in good shape. Good luck, and happy filing! 🎉