Tax Law Changes That Can Fatten Your Refund
Some changes to tax relief options and forms could mean good things for your refund. Learn about a few basic steps you can take in areas such as your retirement account and energy spending to potentially see an increase.
Key Takeaways
- For 2024, the Standard Deduction increased to $14,600 for those filing as single or married filing separately, to $21,900 for Head of Household, and $29,200 for married filing jointly. For 2023, these amounts are $13,850 for Single and Married Filing Separately, $20,800 for Head of Household and $27,700 for Married Filing Jointly. The Standard Deduction is greater for the elderly and the blind.
- To adjust for inflation, the IRS has raised the income limits for all tax brackets for 2024.
- The age for required minimum distributions, or RMDs, has been raised from 72 to 73 beginning in 2023 for those not already required to take RMDs. Those with traditional IRAs can make contributions past the age of 70.5 beginning in 2020.
- The 2024 maximum employee contribution amount for 401(k)s, 403(b)s, 457 plans has increased to $23,300. The SIMPLE IRA contribution limit has increased to $16,000. The 2023 amounts are $22,500 for 401(k)s, 403(b)s, 457 plans and to $15,500 for SIMPLE IRAs.
Recent congressional acts have made a number of adjustments to the tax code, and some of these changes may affect your refund. We've rounded up 10 recent and important tax law changes that can potentially increase the amount you are refunded. It's best to review the changes that have occurred every tax year so you can be sure not to miss out on any refund advantages when you file.
1. The American Opportunity Credit changes
The once temporary American Opportunity Credit has now been made permanent. Depending on income and filing status, taxpayers who pay college-related costs for themselves, a spouse, a child, or another dependent can receive a credit for up to $2,500 in tuition and related expenses, such as course materials.
Here's how it works: You get a credit for 100% of the first $2,000 you spend on post-secondary education. After that, you can claim a credit of 25% of up to the next $2,000. The credit is partially refundable, so if it reduces the taxes you owe below zero, you can receive up to $1,000 in the form of a refund.
2. Retirement account changes
The SECURE Act and the CARES Act have created several tax-law changes for retirement plans. Here are the highlights:
- The SECURE Act raised the minimum age of RMDs from 70.5 to 72 for anyone who turns 70.5 after 2019. However, the CARES Act allows seniors to forego RMDs in 2020 without penalty.
- Those with traditional IRAs can now make contributions past the age of 70.5 beginning in 2020.
- Taxpayers who are having a baby or adopting a child can now take IRA and 401(k) payouts of up to $5,000 (per parent) without paying the 10% penalty.
- For the 2020 tax year, taxpayers under 59.5 years of age can take IRA and 401(k) payouts of up to $100,000 for coronavirus-related expenses without paying the 10% penalty. Additionally, the coronavirus-related distribution can be included in income in equal amounts over a three-year period. The taxpayer has three years to put the money back into the accounts in order to undo the tax consequences of the distribution.
- Retirement plan loans that were due in 2020 are delayed for one year.
- The 2024 maximum employee contribution amount for 401(k)s, 403(b)s, 457 plans has increased to $23,000, and SIMPLE IRAs has also increased to $16,000. Additionally, the income ceilings on Roth IRA contributions have increased and is based on your adjusted gross income (AGI). The 2023 amounts are $22,500 for 401(k)s, 403(b)s, 457 plans and to $15,500 for SIMPLE IRAs.
3. Standard Deduction increase
The Standard Deduction is also undergoing tax law changes in 2024.
2024 amounts:
Filing Status | Standard Deduction |
Married filing jointly under the age of 65 | $29,200 |
Married filing jointly over the age of 65 | $29,200 plus $1,550 for each spouse over the age of 65 |
Single or married filing separately under the age of 65 | $14,600 |
Single or married filing separately over the age of 65 | $16,550 |
Heads of household under the age of 65 | $21,900 |
Heads of household over the age of 65 | $23,850 |
2023 amounts:
Filing Status | Standard Deduction |
Married filing jointly under the age of 65 | $27,700 |
Married filing jointly over the age of 65 | $27,700 plus $1,500 for each spouse over the age of 65 |
Single or married filing separately under the age of 65 | $13,850 |
Single or married filing separately over the age of 65 | $15,700 |
Heads of household under the age of 65 | $20,800 |
Heads of household over the age of 65 | $22,650 |
4. Tax bracket changes
The IRS has adjusted the 2024 income limits for all tax brackets:
Filing status and income | Marginal Tax Rate |
Single over $609,350
Married filing jointly over $731,200 |
37% |
Single over $243,725 to $609,350
Married filing jointly over $487,450 to $731,200 |
35% |
Single over $191,950 to $243,725
Married filing jointly over $383,900 to $487,450 |
32% |
Single over $100,525 to $191,950
Married filing jointly over $201,050 to $383,900 |
24% |
Single over $47,150 to $100,525
Married filing jointly over $94,300 to $201,050 |
22% |
Single over $11,600 to $47,150
Married filing jointly over $23,200 to $94,300 |
12% |
Single up to $11,600
Married filing jointly up to $23,200 |
10% |
The 2023 income limits for all tax brackets:
Filing status and income | Marginal Tax Rate |
Single over $578,125
Married filing jointly over $693,750 |
37% |
Single over $231,250 to $578,125
Married filing jointly over $462,500 to $693,750 |
35% |
Single over $182,100 to $231,250
Married filing jointly over $364,200 to $462,500 |
32% |
Single over $95,375 to $182,100
Married filing jointly over $190,750 to $364,200 |
24% |
Single over $44,725 to $95,375
Married filing jointly over $89,450 to $190,750 |
22% |
Single over $11,000 to $44,725
Married filing jointly over $22,000 to $89,450 |
12% |
Single up to $11,000
Married filing jointly up to $22,000 |
10% |
TurboTax Tip:
For tax years 2022 through 2032, you may be able to claim a credit worth 30% of the cost of certain energy-efficient equipment installed in your home, including solar water heaters, solar panels, fuel cells, and wind turbines. The credit is not refundable, but the excess can be carried forward to future tax years.
5. Charitable cash donation changes
For 2020 and 2021, the CARES Act suspended the 60% of AGI limit for most charitable cash deductions, which allows for more deductions by taxpayers who itemize. This does not apply if the cash donations go to a donor-advised fund or private nonoperating foundation. Additionally, taxpayers who don't itemize can deduct qualified charitable cash contributions up to $300 in 2020 and 2021 regardless of filing status and up to $600 in 2021 if married filing jointly.
For 2023 and 2024 you will need to itemize your deductions to claim your charitable contributions.
6. W-4 changes
In 2020, the IRS changed the Form W-4. Workers no longer claim withholding allowances on the form. The new Form W-4 is now simplified and requires information about filing status, number of dependents, number of jobs, estimated tax breaks, and other income that may be reported on a 1040. Employees are not required to submit a new Form W-4 unless they are hired after 2019 or want to adjust their withholdings.
7. Form 1099-MISC and Form 1099-NEC changes
For tax year 2020 and onward, Form 1099-MISC has been revamped and Form 1099-NEC is back. Because of these changes, employers will no longer report nonemployee compensation of $600 or more on Form 1099-MISC. These types of payments to non-employees should be reported on a Form 1099-NEC. These payments include commissions, fees, prizes, awards, or any form of compensation to nonemployees. These forms should be given to the payee and filed with the IRS by January 31 each year.
The IRS is gradually phasing in new 1099-K reporting requirements for payments from third-party processors like Venmo and Paypal. In 2021, Congress changed the reporting threshold from over $20,000 in payments and more than 200 transactions to over $600 in payments regardless of the number of transactions. But instead of using the new $600 threshold right away, the IRS applied the previous reporting threshold for the 2022 and 2023 tax years. For the 2024 tax year, the IRS is using a $5,000 threshold, regardless of the number of transactions. The threshold will drop to $2,500, regardless of the number of transactions, for the 2025 tax year. Starting in 2026, the $600 threshold will apply.
There is no threshold for payment card transactions.
8. Long-term care premium deduction changes
For taxpayers who itemize on Schedule A or self-employed taxpayers who complete a Schedule 1 of Form 1040, the limits for long-term care premium deductions are:
2024 amounts:
- Age 40 or under: $470
- Age 41 to 50: $880
- Age 51 to 60: $1,760
- Age 61 to 70: $4,710
- Age 71 and over: $5,880
2023 amounts:
- Age 40 or under: $480
- Age 41 to 50: $890
- Age 51 to 60: $1,790
- Age 61 to 70: $4,770
- Age 71 and over: $5,960
9. Alternative Minimum Tax (AMT) changes
In early 2013, Congress made the AMT "patch" permanent to prevent millions of taxpayers from having to pay AMT in 2013 and beyond.
The exemption amounts for 2024 are:
- $85,700 for Single and Head of Household filers
- $133,300 for married couples filing jointly and surviving spouses
- $66,650 for married people filing separately
The exemption amounts for 2023 are:
- $81,300 for Single and Head of Household filers
- $126,500 for married couples filing jointly and surviving spouses
- $63,250 for married people filing separately
10. Energy-efficiency credit changes
If you installed certain energy-efficient equipment in your home, such as solar water heaters, solar panels, fuel cells, and wind turbines, you may be able to claim a credit worth 26% of the expense in tax years 2020 and 2021. The credits jump back up to 30% beginning in 2022 through 2032. After this it goes back down to 26% for 2033 and to 22% in 2034. The credit expires after 2034. The credit is not refundable, but the excess can be carried forward to future tax years.
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