CPE Federal Tax Updates (2024)

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Inside This Article

It’s that time for the National Duty of every citizen.

The time to fill up the treasury’s coffers.

But before that, it’s vital to understand the changes made to the tax structure for the year.

That’s where we have got you covered. Read through the article, for it covers the following premises:

Tax Time

1. Comparison of Tax Brackets across tax filer status.

2. Changes in the taxes in Business Income.

3. Certain key updates to taxes of Individuals.

4. Availing Tax Credits.

Tax Brackets 2024 vs 2023

2024 taxes

For Single Income Tax Assesses

The following table draws comparison between the Income Brackets for taxes in 2024 as against in 2023 for people assessed to tax under the category of Single. In 2024, there has been a favorable impact on the assesses with a favorable shift in Income Brackets for taxes, thereby minimizing the liabilities on Income Taxes to the Federal Govt.

Tax Rate	Income Bracket - 2024	Income Bracket - 2023
10%	Income up to $11,600	Income up to $11,000
12%	From $11,601 to $47,150	From $11,001 to $44,725
22%	From $47,151 to $100,525	From $44,726 to $95,375
24%	From $100,526 to $191,950	From $95,376 to $182,100
32%	From $191,951 to $243,725	From $182,100 to $231,250
35%	From $243,726 to $609,350	From $231,251 to $578,125
37%	From $609,351 or more	From $578,126 or more

For Married Income Tax Assesses

The following table draws a similar comparison between the Income Brackets for couples assessed as Married and filing their return jointly. In 2024, there has been a shift in the brackets which makes it favorable to file Income Returns Jointly rather than separately.

Tax Rate	Tax Bracket - 2024	Tax Bracket - 2023
10%	Income up to $23,200	Income up to $22,000
12%	From $23,201 to $94,300	From $22,001 to $89,450
22%	From $94,301 to $201,050	From $89,451 to $190,750
24%	From $201,051 to $383,900	From $190,751 to $364,200
32%	From $383,901 to $487,450	From $364,201 to $462,500
35%	From $487,451 to $731,200	From $462,501 to $693,750
37%	From $731,201 or more	From $693,751 or more

For those Income Tax Assesses who are Married but file their Tax Returns Separately

The following table draws the comparison between the Income Brackets for couples assessed as Married and opting to file their Income Returns separately. The shift is very similar in line with that for Single assessees. As stated earlier, the IRS has incentivized joint filing vs separate filing of Income Returns for Married Assessees.

Tax Rate	Tax Bracket - 2024	Tax Bracket - 2023
10%	Income up to $11,600	Income up to $11,000
12%	From $11,600 to $47,150	From $11,001 to $44,725
22%	From $47,151 to $100,525	From $44,726 to $95,375
24%	From $100,526 to $191,950	From $95,376 to $182,100
32%	From $191,951 to $243,725	From $182,100 to $231,250
35%	From $243,726 to $365,600	From $231,251 to $346,875
37%	From $365,601 or more	From $346,876 or more

Join MY-CPE’s one-day webinar to get up-to-date on business income tax changes. We’ll cover the latest Federal tax laws, new forms, and key updates like the SECURE & CURES Acts and TCJA provisions. You’ll also get a handy reference manual and J.Patrick Garverick Quick Reference Chart to help you stay on track.

For those Income Tax Assesses who are assessed as the Head of Household

The following table analyzes the change in Income Brackets for Assessees categorized as the Head of the Household and as we can observe, the rates have been enhanced in comparison to the Single Assesses and further, there has been a boost of relief through increased Income Brackets which will result in lower tax liabilities for the Heads of Household.

Tax Rate	Tax Bracket - 2024	Tax Bracket - 2023
10%	Up to $16,550	Up to $15,700
12%	From $16,551 to $63,100	From $15,701 to $59,850
22%	From $63,101 to $100,500	From $59,851 to $95,350
24%	From $100,501 to $191,950	From $95,351 to $182,100
32%	From $191,951 to $243,700	From $182,100 to $231,250
35%	From $243,701 to $609,350	From $231,251 to $578,100
37%	From $609,351 or more	From $578,101 or more

Effective Tax Impact on the Assessees

To assess the impact of shifts in Income Brackets, we will be using the metric of “Effective Tax Rate” or ETR in short. ETR is calculated as the amount of tax liability as percentage of your total assessed income.

Let’s understand this with an example:

Status of the Assessee: Single.

Total Assessed Income: $50,000.

Tax Liability for 2024 = $6,053, making an ETR of = 6,053/50,000 = 12.10% of Assessed Income.

Similarly the Tax Liability for 2023 = $6,307.5, making an ETR of 12.62%.

Changes in the taxes to Individuals

Taxes on Capital Gains & Qualifying Dividends

There is no change to the tax rates on Capital Gains and certain eligible dividends, but the slabs have been revised for the year 2024, and the following table summarizes the income slabs and the applicable tax rates.

Applicable Tax Rate	Income Bracket - Joint Filers	Capital Gains & Dividend Income Bracket - Head of the Household	Capital Gains & Dividend Income Bracket - Single
0%	Up to $94,050	Up to $63,000	Up to $47,025
15%	From $94,051 to $583,750	From $63,001 to $551,350	From $47,026 to $518,900
20%	Income from $ 583,751	Income from $551,351	Income from $518,901

AMT

Exemptions in AMT have been revised to the following limits:

$133,300 for married individuals filing their returns jointly.
$85,700 for Singles and Heads of Households.
$66,650 for married individuals filing their returns separately.
$29,900 for Estates and Trusts.

Child Tax

The 1st $1,300 is exempted from tax, the next $1,300 at the applicable tax rate for the child, the remaining tax at the applicable rate for the parent.

HSA Contribution

Individuals can contribute up to $4,150. The limit is fixed at $8,300 for families.

Fringe Benefits

Tax free employee parking facilities, the exclusion for mass transit passes, commuter vans is raised to $ 315 per month.

Changes to Retirement Planning

Some of the Key provisions of the SECURE Act 2.0 that are set to be taking effect from 2024 are as follows:

People of the age of under 59 y 6 m will have an increased limit in withdrawing funds from their IRAs and 401(k)s without incurring penalties. The limit is set to $10,000 for victims of Domestic Abuse and $1,000 for emergencies for withdrawal without the 10% additional tax. The regular taxes stand applicable.
Remaining funds in 529 Education Accounts can be rolled over without any tax implication to a Roth IRA. However there exists a life-time cap of $35,000 of the roll over amount and with an annual pay-in of $7,000. However, the 529 Accounts must be opened for 15 years.
For Roth 401(k), there is no more requirement to take minimum distributions.
SECURE 2.0 allows employers to match 401(k) contributions against repayment of Student Education Loans.
The cap for eligible charitable distribution is increased to $105,000 in line with inflation for 2024 for people above the age of 70 y 6 m through their IRAs and such withdrawal is exempted from taxes.
Plan sponsors can now create emergency savings accounts for their participants to facilitate transfer to Roth Accounts, subject to a maximum of $25,000 account balance per participant.

Changes in the taxes on Business Income

Depreciation of Fixed Assets

In respect of depreciation, the rates of depreciation for the 1st year bonus depreciation have been brought down from 80% in 2023 to 60% in 2024.

At the same time, the threshold for expenses under Section 179 is increased to $1,220,000.

Accounting Method

In 2024, any C Corporations with an annual turnover of less than $30 million over the past 3 years can adopt the cash basis of accounting.

Mileage Allowance

For businesses, the standard mileage rate allowable is changed to $0.67 per mile.

For Medical travel and military transport, the standard rates are $0.21 per mile.

For charitable purposes, the standard rates are $0.14 per mile, constant from 2023.

Clean Energy Credits

Clean Energy Credits under the Inflation Reduction Act can be monetized, subject to conditions.

Businesses are permitted to transfer up to 11 Credits to any unrelated third parties for cash.

State Governments & Local Governments can treat up to 12 Energy Saving Credits as payment of Income Tax and be entitled to claim refunds for the amount in excess to their Tax Liability.

Pass Through Income

On Pass through income, Assessees are eligible to claim a deduction of 20% of Eligible Business Income, subject to a maximum of $ 383,900 & $ 191,950 for Joint Filers and other Individual Assessees respectively.

Availing Tax Credits

Credits on Purchase of EV

Buyers can avail the option to monetize up to $7,500 of tax credits on purchasing eligible EVs, thereby minimizing their tax payout to the dealer at the time of purchase.

Standard Deduction

The Standard Deduction for the year has been indexed in line with the inflation for 2024 and have been increased as against the limits in 2023.

Adoption Tax

The credit on Adoption Tax is enhanced up to $16,810 of the qualifying expenses.

For special needs adoption, the full credit is available even if lower costs are incurred.

Conclusion

To sum up, these changes have slightly eased the burden of compliance while at the same time, they have a larger perspective of being in line with the Global expectations on climate action, also enabling the salaried class to tackle the impact on account of inflation.

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Nicholas Branson, CPA

Director

The author, Nick Branson is a CPA and Co- president of MYCPE ONE – Continuing Education Platform for Professionals. He has experience of more than 2 decades in the field educating the top professionals in the field of CPA, CMA, CIA and many more.