A Look into the 2024 IRS Tax Changes: Everything You Need to Know

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Before you go on reading an article about tax changes from a financial planning firm, let’s clarify why tax planning and financial planning are even being paired together in the first place. It’s important to get really clear on two things:

1) Yes, you are paying too much in taxes. Yes, something can be done about it. This point cannot be overstated! If you are a high-net-worth individual, family, or institution we commonly see two things, complexity and significant amounts of taxes being paid. For the majority of our clients, their tax bill is their largest bill. These physicians, dentists, engineers, business owners, executives, etc. are all paying lots of money in taxes. Tencap’s assertion is that we all need to pay taxes – we acknowledge that. However, we are unabashedly a stand for paying no more than is needed. Therefore, our company is set up with complete teams that we lean on to help in the tax planning space. 

2) Yes, we know you have “a good CPA.” That’s not the point. Tencap is not competing with your CPA, we are interested in collaborating with your CPA. Each Tencap client has access to our dynamic tax team. This means Tencap will do a thorough review of your tax return (business or personal) and bring you ideas to implement with your CPA. You see, our team is training in tax strategy, while most CPAs are trained in tax compliance – you need both!

There are far too many things in your financial world In the ever-evolving landscape of America’s tax policies, it only takes the signature of the POTUS to enact changes that have ripple effects for taxpayers. These legislations can reshape financial strategies and obligations, so staying informed is vital in your tax planning.

Understanding these changes makes navigating the complexities of tax planning, ensuring compliance, and maximizing opportunities. Ultimately, a firm grasp of the tax changes in 2024 should help you stay compliant and reduce taxes.

Federal Tax Changes in 2024

When adjusting your tax strategies, it’s essential to look at the federal tax changes coming your way in 2024. Here is a comprehensive review of the IRS tax changes in 2024.

1. Income tax bracket

This year’s adjustments in the income tax brackets account for inflation. Below is the breakdown of the new income tax bracket for 2024:

Tax Rate Taxable Income for Single Filers Taxable Income for Married Couples Filing Jointly
10%  $11,600 or less $23,200 or less
12%  Over $11,600  Over $23,200
22%  Over $47,150 Over $94,300
24%  Over $100,525 Over $201,050
32%  Over $191,950 Over $383,900
35%  Over $243,725 Over $487,450
37%  Over $609,350 Over $731,200

 

It is not as simple as multiplying your income by the corresponding tax rate. Suppose your income for the year is $700,000. With America’s progressive tax system, slices of your income are taxed higher as it moves up the bracket. Taxes on your income will be as follows:

 

Tax Rate Income Slices Taxable Amount Tax Due
10% $11,600 $11,600 $1,160
12% $47,150 $35,549 $4,265
22% $100,525 $53,374 $11,742
24% $191,950 $91,424 $21,941
32% $243,725 $51,774 $16,567
35% $609,350 $365,624 $127,968
37% $700,000 $90,650 $33,540
Total Tax Due $217,186

 

If you’re in a higher tax bracket, consider maximizing standard and optional deductions to decrease your taxes.

2. Standard tax deduction for married couples

Married couples filing jointly can now enjoy an increased standard deduction of $29,200 for tax year 2024, a $1,500 boost from the previous year. If filing separately, the standard deduction is $14,600 compared to $13,850 in 2023. 

3. Adoption tax credit

The adoption tax credit gets a notable boost, too. The maximum credit for qualified adoption expenses is $16,810, up from the previous $15,950. This tax credit offers a dollar-for-dollar reduction in your total tax liability for the year. Since it’s nonrefundable, you can only use it for the year’s tax liability. Taxpayers who adopt their spouse’s child can’t claim this credit.  

4. Alternative minimum tax (AMT) exemption 

Created in the 1960s, AMT aims to prevent high-income earners from circumventing their individual income tax. This system mandates taxpayers to calculate their bill twice and pay for the higher of the two. However, some high-income individuals can be exempt from paying this tax. 

The 2024 AMT exemption increases to $85,700, with phase-outs or reduced tax exemptions starting at $609,350. The exemption amount for married couples filing jointly is $133,300, and phase-outs begin at $1,218,700.

 

These numbers show a significant jump from the previous years. In 2023, the AMT exemption for individual taxpayers was $81,300, phasing out from $578,150. For married couples filing jointly, it was $126,500 and phased out at $1,156,300.

5. Contribution limits for retirement plans

This year’s limit for 401(k), 403(b), and most 457 plans rise to $23,000 from $22,500 in 2023. Meanwhile, the IRA contribution limit hits $7,000, an increase of $500 from the previous year. These adjustments may affect your tax planning and retirement savings strategies if you’re a high-income earner.

6. Earned income tax credit (EITC)

Tax changes for 2024 enable low- to moderate-income workers and families to enjoy increased tax savings as the earned income tax credit (EITC) sees an uptick. For this year, the maximum amount for the EITC climbs to $7,830 for eligible taxpayers with three or more qualifying children, up from $7,430 in the tax year 2023. 

Since it’s a refundable tax credit, you can receive the excess when you don’t owe any taxes.

7. Estate tax exemption

Estate planning receives a nudge with its tax exemption rising to $13.61 million ($27.22 million for married couples) for descendants who die in 2024. This amount is a considerable rise from the $12.92 million exemption amount in 2023. Ask your estate planner how this affects your plan. 

8. Foreign earned income tax exclusion

Those earning income outside the country can benefit from an increased exclusion of $126,500 for tax year 2024, up from $120,000 in 2023. This exclusion encompasses wages, salaries, or professional fees earned while living and working outside the United States. However, it doesn’t include payments from corporations deemed as a distribution of earnings rather than fair compensation.

9. Gift tax limit

The gift tax limit rises from $17,000 for 2023 to $18,000 for 2024, preventing you from incurring tax liabilities and enabling tax-free gifting within specified limits.

10. Tax credit and deduction changes

Be on the lookout for adjustments in tax credits and deductions, especially since 2024 brings in new developments for these tax benefits. Thanks to the Tax Cuts and Jobs Act, itemized deductions will continue to have no limitations in 2024. 

However, the Lifetime Learning Credit gradually decreases for taxpayers whose modified adjusted gross income surpasses $80,000 ($160,000 for joint filers). If your income exceeds these thresholds, the amount of credit you can claim diminishes. Eventually, once your income surpasses the upper limit, you won’t qualify for the credit.

Utah State Tax Changes in 2024

Navigating Utah’s tax landscape should be more attractive, with several changes taking effect in 2024. These modifications range from income tax rates to adoption credits. Consider these 2024 tax changes in Utah to help you adjust your financial plans accordingly.

1. Utah tax rate

The Utah Legislature’s enactment of H.B. 54 spells good news, as it slashes the individual income tax rate from 4.85% to 4.65%. If you reside in Utah, this reduction translates to potential savings and lets you keep more of your hard-earned income. 

2. Utah earned income tax credit

Under the provisions of HB 54, the Utah Legislature limits the state’s EITC to the amount of income earned within Utah. That means you can claim a Utah-earned income tax credit equivalent to 20% of your federal EITC, up from the previous 15%. 

3. Solar energy systems payout

The maximum Renewable Residential Energy Systems Credit for solar power installations remains unchanged at $400. However, the Renewable Energy Systems Tax Credit (RESTC) offers opportunities for residential and commercial renewable energy systems. 

The credit for systems installed from 2023 onwards remains at 25% of a system’s cost and caps at $400, signifying Utah’s support for sustainable energy solutions.

4. Payroll protection program (PPP) 

Under certain circumstances, Utah’s tax treatment of PPP loans forgiven in 2023 requires taxpayers to include those amounts in their unadjusted income for taxation purposes. Say you used forgiven PPP loan proceeds for deductible expenses reported on federal tax returns. You must record this PPP loan in your unadjusted income for taxation purposes.

Taxpayers with interest in pass-through entities receiving forgiven PPP loans must report their share of forgiven amounts.

5. Nonresident exemption

Thanks to S.B. 39, which was passed by the Utah Legislature in 2022, nonresidents working in Utah for 20 days or less during the tax year are exempt from filing a tax return. To qualify, nonresidents must not have any other Utah income sources and reside in a state that either lacks an income tax or exempts nonresident wages from taxation.

6. Additional dependent for taxpayer tax credit

The H.B. 54 legislation introduces an additional personal exemption when calculating your tax credit in the year of a qualifying dependent’s birth. On top of current dependents listed on your federal tax returns, you can claim an additional one for a newborn dependent on their birth year. In effect, you can reduce your taxable income. 

7. Tax credits for adoption expenses

Recent legislative changes under H.B. 130 have repealed the Special Needs Adoption tax credit, wherein eligible taxpayers can claim a maximum of $1,000 per return. This amendment has retrospective operation starting Jan. 1, 2023.

The legislative changes also include tax credits for refundable and nonrefundable adoption expenses. Taxpayers adopting a qualifying child domestically may claim expenses such as adoption and attorney fees. Eligible adoptive parents can claim tax credits of up to $3,500.  

8. Interest rate for tax deficiencies

As a taxpayer, you should be mindful of interest rates on tax deficiencies. The 2024 tax changes in Utah set the interest rate at 7%. Failing to file tax returns, settle dues on time, or pay your tax liabilities in full may result in penalties and accrued interest. 

How Do These Changes Affect Me?

Besides knowing the tax changes in 2024, you must also understand how these adjustments can affect you and your finances to help you make informed financial decisions. Below are some ways IRS tax changes in 2024 can affect financial planning.

1. You may now be in a higher tax bracket

With adjustments to income tax brackets, you might be in a different tax bracket from previous years. If your income puts you in a higher bracket, you may also face a higher tax bill. So, factor in these changes when planning your finances and budgeting for tax liabilities.

2. Your tax obligations may have increased

Changes to tax rates and deductions can influence your overall tax liability. Raised tax rates and reduced deduction opportunities may result in you owing more taxes than anticipated. So, review your situation regularly and adjust your withholding or estimated tax payments accordingly to avoid surprises come tax time.

3. You may have more opportunities to reduce tax obligations

On the flip side, tax changes in 2024 can also present new opportunities for tax savings. For instance, increased contribution limits for retirement plans provide an avenue for reducing taxable income and maximizing tax-deferred growth. Likewise, new tax credits or deductions, such as the expanded Utah earned income tax credit, can help offset liabilities and put more money back in your pocket.

4. You may have to adjust your retirement contributions 

Changes to contribution limits for retirement plans may require you to reassess your retirement savings strategy. This year’s increased limits can be an excellent opportunity to maximize your contributions and take advantage of tax-deferred growth and potential employer matches. 

5. You may have to fill out forms differently

Tax law changes in 2024 can also impact how you complete your tax forms. For example, new tax credits or deductions may require additional documentation or different reporting procedures. To stay informed about these changes, seek guidance from tax professionals regarding accurate and compliant tax filing.

Maximize Your Tax Strategy for 2024

Navigating the intricacies of 2024 tax changes calls for an in-depth understanding of impending adjustments. From federal to state reforms, every modification presents opportunities and challenges. It’s in your best interest to know how these changes can affect your finances, including taxes.

While many of our clients are Utah residents, Tencap has clients all over the country. Because the strong majority of tax planning exists on the federal return, regardless of the state you live in, Tencap would be happy to help you reduce your tax bill, where possible. Regardless of the state you live in, give us a call to see what ideas are possible for your personal or business tax return.

These tax policy changes affect everybody differently. So, consult a trusted financial advisor to optimize your tax strategy and align it with your overall financial plan. At TenCap Wealth Coaching, our team is  ready to guide you through these changes to help you build and secure your wealth.

Contact us today to start working with a comprehensive financial advisor that is ready to coach you on every aspect of your financial world! This includes insurance planning, estate planning, tax planning and of course financial planning. On the other side of a review that is this broad, is a level of responsibility that you will value – a sense of responsibility that each of our clients can distinguish. 

Call or visit our website for a no-cost first meeting, today!

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Joe Griffin
CEO Tencap Wealth Coaching | + posts

Joe has been building and managing financial planning firms for the past 13 years. He loves the financial planning space and is very proud of the success and growth that has come from his proprietary marketing and leadership. Joe spent years being involved with the bright minds of the investment committee at Utah’s 529 college savings plan – a plan managing over 20 billion. Joe only works with firms that are stated fiduciaries on a client relationship. Joe is committed to leading a financial planning firm with ethics and integrity.  The money management philosophy that Tencap subscribes to is built on strong academics and is supported by a highly impressive academic board. We can't wait to coach you on the excellence that Tencap stands for.

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