2025 Tax Update Newsletter (Tax Year 2024)
Happy New Year! If you would like to send your tax information via a secure electronic portal, please call the office and we’ll provide you the password and upload link. Alternatively, you can mail it to PO Box 498, Ingleside IL 60041 or drop off (please call first) at 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 and would like one, please contact my office staff.
The following information includes some, but not all of the major changes, which affect tax year 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 (due to the Inflation Reduction Act) 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 2024 (per person) for the “above the line” deduction.
Standard Deduction for 2024 is $14,600 for single, $29,200 for married filing jointly, and $21,900 for head of household. For 2025 these amounts are $15,000, $30,200 and $22,500, respectively.
Child Tax Credit for 2024 - Age limit is 16, max credit per child is $2,000 and $1,700 of that may be refundable. For 2025, the credit remains at $2,000 with $1,800 refundable.
HSA contribution for 2024 (for those in high deductible health plans, where the 2024 deductible is $1,600 single and $3,200 family) the maximum contribution for 2024 is single $4,150 and family $8,300. There is an annual “catch up contribution” available for those age 55 and over of $1,000. For 2025, the deductible amounts required are $1,650 individual and $ 3,300 family; and the contribution limits are $3,400 single and $8,550 family. To contribute to an HSA, you must be enrolled in an HSA-eligible health plan. You have until the tax filing deadline (April 15 of the following year) to contribute. Annual out of pocket maximums for 2025 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 2025 under full retirement age is $23,400 and for the year full retirement is reached is $62,160. Maximum FICA taxable earnings for 2024 and 2025 are $168,600 and $176,100 respectively.
Standard Mileage Deduction 2024, these rates are .67 business, .14 charitable, and .21 cents medical and military moving. For 2025 these rates are .70, .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 2024 IRA limit is $7,000 and 2025 is also $7,000 (catch up of $1,000 for both years) and SIMPLE- $16,000 for 2024 and $16,500 for 2024 (catch up $3,500 for 2024 and 2025). 401(k), 403(b) and most 457 plans are $23,000 for 2024 and $23,500 for 2025 (catch up of $7,500 for 2024 and 2025). For defined contribution plans and SEPs, 2024 limits are lesser of $69k or 25% of compensation, and $70k for 2025. 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.
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 2024 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. https://www.irs.gov/forms-pubs/about-publication-544
Residential Clean Energy Credit under IRC section 25D is non-refundable, and is available for expenses for qualified solar electric, water heating, fuel cell, small wind energy and related property installed in a taxpayer’s home through 2032 and decreases after that. If you use your home for business, the credit is limited.
Clean Energy Credit for 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. When purchasing a new vehicle, make sure you understand what is eligible. This information is available at https://fueleconomy.gov/feg/tax2023.shtml. Credit is available for some used vehicles as well.
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.
Healthcare Enhancement for Local Public Safety Retirees Act allows a reduction of taxable earnings by $3,000 for medical insurance premiums paid during a calendar year. The premium no longer has to be deducted from the retiree’s pension check. Instructions on claiming the reduction are included in IRS Publication 575 (page 7)
H.R. 5863 – The Federal Disaster Tax Relief Act of 2023 has been signed into law on 12/17/24 by the President. Officially took effect on 12/12/24. Eliminates the 10% AFI threshold for qualified disaster losses and allows Americans to claim such losses without itemizing Deduction. Applies to federally qualified disasters dating back to February 2021 and provides relief for Hurricanes Ian, Milton, Helene, Idalia, Debby, Nicole, and Fiona. Also applies to 300+ additional occurrences such as the Maui Fires and recent California wildfires. Please contact us to discuss, as this is only a small recap of the Act.
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.