2024 Tax Update Newsletter (Tax Year 2023)
Happy New Year! If you would like to send your tax information via a secure electronic portal, the link is on my website www.jblackassociates.net. If not, my address is 31632 North Ellis Drive, Unit 112, Volo, IL 60073. Please take a few minutes to review this newsletter. If you have any questions, call me or enclose a note with your tax information. If you didn’t receive an organizer with this letter and you would like one, let me know. When you mail something to me, please use the PO Box and not my street address in Volo.
The following information includes some, but not all of the major changes, which affect tax years 2023 and 2024.
(Not new, but warrants repeating) You may voluntarily opt into the IP PIN program to protect yourself from tax-related identity theft. You will be furnished a new PIN annually. I strongly suggest this, as identity theft is increasing.
On 2/3/2020, IRS launched Identity Theft Central, designated to improve access to information about identity theft and data security protection for taxpayers, tax professionals and businesses. Located at http://www.irs.gov/identitytheft.
Premium tax credit and its expanded eligibility is extended through 2025, meaning there is no income cap on tax credit eligibility through 2025.
Age for mandatory minimum distributions from 401(k) or IRA is now 73, effective 1/1/2023.
Educator expense deduction is increased to $300 for 2023 (per person).
Standard Deduction for 2023 is $13,850 for single, $27,700 for married filing jointly, and $20,800 for head of household. For 2024 these amounts are $14,600, $29,200 and $21,900, respectively.
Child Tax Credit for 2023 - Age limit is 16, max credit per child is $2,000 and $1,600 of that may be refundable. For 2024, the credit remains at $2,000 with $1,700 refundable.
HSA contribution for 2023 (for those in high deductible health plans, where the 2023 deductible is $1,500 single and $3,000 family) the maximum contribution for 2023 is single $3,850 and family $7,750. There is an annual “catch up contribution” available for those age 55 and over of $1,000. For 2024 the deductible amounts required are $1,600 individual and $3,200 family; and the contribution limits are $4,150 single and $8,300 family. To contribute to an HSA, you must be enrolled in an HSA eligible health plan. You have until tax filing deadline (April 15 of the following year) to contribute. Annual out of pocket maximums for 2024 cannot exceed $8,050 single and $16,100 family.
Earnings Ceiling for Social Security - Prior to reaching full retirement age, there is a deduction of $1 for every $3 you earn over the limit. For 2024 under full retirement age is $22,320 and for the year full retirement is reached is $59,520. Maximum FICA taxable earnings for 2023 and 2024 are $160,200 and $168,600 respectively.
Standard Mileage Deduction 2023 - these rates are 65.5 business, 14 charitable, and 22 cents medical and moving. For 2024 these rates are 67, 14 and 21 cents, respectively. Deduction is dependent on "contemporaneous" (occurring at the time of the event, not reproduced later) mileage log including who, what, where and when.
Pension and IRA Contribution Limits - Maximum retirement contributions for 2023 IRA limit is $6,500 and 2024 is $7,000 (catch up of $1,000 for both years) and SIMPLE- $15,500 for 2023 and $16,000 for 2024 (catch up $3500 for 2023 and 2024). 401(k), 403(b) and most 457 plans are $22,500 for 2023 and $23,000 for 2024 (catch up of $7,500 for 2023 and 2024). For defined contribution plans and SEPs, limits are lesser of $66k or 25% of compensation, and $69k for 2024. Please note there is a phase out of deduction/allowable amount, due to income limitations and rules when you have more than one retirement plan.
IRA contribution deadline for 2023 tax year is April 15, 2024. And the age for required annual distributions is 73 (if you reach age 72 after Dec. 31, 2022).
Saver’s Credit income limits - You get a credit on your Federal return in addition to reduced taxes caused by making a retirement contribution (IRA, employer sponsored plan, or ABLE account). This credit is eligible for 2023 for all filing statuses, based on income limitations.
Virtual Currency transactions are required to be reported on your return. What schedule to report on depends on what you received it for (capital transactions, business income, etc) Starting in 2023, the IRS requires brokers to provide reporting statements to individuals with virtual currency transactions. For more information, see Publication 544.
Energy efficient home improvement credits under IRC section 25C are extended to 12/31/2032. This includes building envelope components (exterior door, windows and skylights, insulation and air sealing materials or systems, and home energy audits). Also residential energy property expenditures heaters, central air conditioners and boilers, that satisfy the energy efficiency requirements.
Residential Clean Energy Credit under IRC section 25D is available for expenses for qualified solar electric, water heating, fuel cell, small wind energy and related property installed in a taxpayer’s home. If you use your home for business, the credit is limited.
Clean Energy Credit for new vehicles is available to buyers of qualifying new vehicles purchased after 4/17/23 and through 12/31/32, subject to phase out at certain adjusted gross income ranges. If you are purchasing a new vehicle, make sure you understand what is eligible. More information can be found here.
Clean Energy Credit for used vehicles also is available to buyers of used vehicles, that qualify, subject to phase out with the same date restrictions as new.
Form 1099-K reporting threshold - beginning with 2023, for payments for goods and services in excess of $600, on any number of transactions. This is a change from 2022. Some issuers may not mail a physical form, and you must retrieve it from their website.
Circular 230 Disclaimers
Any tax advice contained in this newsletter is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service, or to promote, market, or recommend to another person any tax related matter.
These materials are distributed with the understanding that Jacqueline Black & Associates, Ltd. assumes no liability whatsoever in connection with the use of this information and assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein. The reader is also cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated.