What's new for tax filing in 2024
Tax season, perhaps America’s least favorite pastime, is well underway. Filing began nearly a month ago, and the final deadline looms on April 15.
Updated tax brackets, new tax credits and expanded eligibility for free filing are among the changes that await taxpayers this year -- whether they like it or not.
“It’s another year of many changes,” Mark Steber, chief tax information officer at preparation service Jackson Hewitt, told ABC News. “Let’s not just dust off last year’s.”
Here’s what’s new for taxpayers in 2024:
Updated tax brackets and standard deductions
The Internal Revenue Service modifies its income tax brackets and standard deductions each year to keep up with inflation. In turn, filers could pay a different rate from one year to the next, even if they report the same income.
In theory, however, earners’ income often increases at a similar rate to inflation, keeping them within a given tax bracket and deduction threshold, Eric Bronnenkant, head of tax at online financial adviser Betterment, told ABC News.
“The process is designed to keep you economically in the same place,” Bronnenkant said.
For instance, a 24% income tax applies to single earners who made more than $100,525 over this filing season. Last year, the same tax rate took effect for single earners who made more than $95,375.
The full set of updated tax brackets and standard deductions is available on the IRS website.
First-time tax credits
Filers can again take advantage of a electric vehicle tax credit put into effect by the Inflation Reduction Act.
Individuals can obtain an EV tax credit of up to $7,500 if they purchase an eligible vehicle and earn less than $150,000. Since the credit is nonrefundable, a filer cannot gain more from the credit than they owe in taxes.
Another tax credit enacted by the IRA, which allows homeowners to upgrade their residence’s energy efficiency, has expanded this year. Earners who take advantage of the tax credit can receive a refund equivalent to 30% of the cost of renovations.
The credit applies to upgrades like home energy audits, energy-efficient windows and insulation. Filers can cover up to a total of $3,200 in combined costs through 2032, though they face a range of annual limits, depending on the specific renovation.
Some taxpayers may also benefit from a potential expansion of the child tax credit. Earlier this month, the House passed a bill that would increase the child tax credit to as much as $3,600 for some filers, raising it significantly from its current level of $2,000.
At least for now, the measure hovers in legislative limbo, awaiting a vote in the Senate. If the credit ultimately goes into effect, IRS officials will automatically apply it to qualifying earners, so filers need not delay, Steber said.
“Don’t wait to file your taxes,” Steber said. “That’s my big message.”
Free tax filing
The IRS is launching an unprecedented system that allows taxpayers to file directly with the agency, bypassing intermediary firms that often charge fees.
The initiative, Direct File, will begin with a pilot program this year in 12 states during unspecified windows of time before becoming widely available to taxpayers in those states in mid-March, according to the IRS.
Taxpayers in those states must also meet eligibility requirements, including income below $200,000 and a straightforward filing.
“This is really the first experiment to see how it goes,” Bronnenkant. “The good part is it doesn’t cost any money; the downside is not everyone is eligible.”
Some taxpayers who don’t qualify for Direct File may take advantage of a separate public-private partnership that allows people to file for free.
IRS Free File, which works through providers such as FreeTaxUSA and TaxSlayer, has raised its maximum income threshold. Filers with an adjusted gross income of $79,000 or less can avail themselves of the service. That maximum income threshold has jumped from $73,000 in the previous year.
ABC News' Kristina Abovyan contributed reporting.
