Get myCPE Unlimited Access @ $499 $199/Annually
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:
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.
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.
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.
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.
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.
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.
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%.
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.
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.
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.
Individuals can contribute up to $4,150. The limit is fixed at $8,300 for families.
Tax free employee parking facilities, the exclusion for mass transit passes, commuter vans is raised to $ 315 per month.
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.
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.
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.
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 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.
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.
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.
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.
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.
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.
Imtiaz Munshi, CPA
-1725971701.webp "August 2024 Monthly Tax Update: How the Latest Changes Impact You")
Jason Dinesen
Nicholas Branson, CPA 
