The IRS updates some tax laws every year, but some years see more significant updates than others. The 2024 tax year saw fewer updates than usual. In fact, for the first time since 2016, no new tax bills have been passed at the federal level. As a tax preparer, it’s important to understand these updates so you can file your clients’ taxes accurately.
Key takeaways for 2024 tax changes
Here is a glimpse of the significant tax law changes for 2024, which will shape the fiscal tax year reflected on 2025 tax returns.
- Tax bracket thresholds increased
- Standard deduction increased
- Contribution limits for retirement accounts increased
- 1099-K reporting threshold dropped to $5,000
- The EITC and Adoption Credit were updated
- The refundable portion of the Child Tax Credit increased
2024 tax bracket changes tax preparers should be aware of
The IRS updates the tax brackets every year to compensate for inflation. Ideally, wider tax bracket thresholds would increase taxpayers’ refunds. However, it’s likely that these annual increases are only enough to account for a change in the cost of living. Your client’s refund or amount owed will probably not change simply due to the tax bracket increases. To see a measurable difference, their withholding rate would have to be increased, and their tax liability reduced.
Tax brackets for tax returns due April 15, 2025
Each of your client’s tax rates are determined by their income and tax filing status. The updated rates and brackets for tax year 2024 (taxes filed in 2025) are as follows.
| Tax rate | Single | Married Filing Joint | Married filing Separate | Head of Household |
| 10% | Up to $11,600 | Up to $23,200 | Up to $11,600 | Up to $16,550 |
| 12% | $11,601 to $47,150 | $23,201 to $94,300 | $11,601 to $47,150 | $16,551 to $63,100 |
| 22% | $47,151 to $100,525 | $94,301 to $201,050 | $47,151 to $100,525 | $63,101 to $100,500 |
| 24% | $100,526 to $191,950 | $201,051 to $383,900 | $100,526 to $191,950 | $100,501 to $191,950 |
| 32% | $191,951 to $243,725 | $383,901 to $487,450 | $191,951 to $243,725 | $191,951 to $243,700 |
| 35% | $243,726 to $609,350 | $487,451 to $731,200 | $243,726 to $365,600 | $243,701 to $609,350 |
| 37% | $609,351 or more | $731,201 or more | $365,601 or more | $609,351 or more |
2024 standard deduction changes tax preparers need to know
The IRS also increases the standard deduction to account for annual inflation. The standard deduction amounts for tax year 2024 (taxes filed in 2025) and for tax year 2025 (taxes filed in 2026) are as follows:
| Filing status | 2024 standard deduction | 2025 standard deduction |
| Single | $14,600 | $15,000 |
| Head of household | $21,900 | $22,500 |
| Married filing jointly | $29,200 | $30,000 |
| Married filing separately | $14,600 | $15,000 |
1099-K requirements tax preparers should know
The 1099-K reporting requirements will change in 2024 for clients who receive payments via third-party networks like PayPal or Venmo. The IRS is lowering the threshold for tax year 2024, which means that all clients who earn more than $5,000 in gross payments with any number of transactions will receive 1099-Ks.
| Form 1099-K rules | 2024 | 2023 |
| Reporting threshold | $5,000 in gross payments | $20,000 in gross payments |
| Transaction threshold | One or more | At least 200 |
Earned Income Tax Credit (EITC) for 2024
The maximum EITC your clients can claim for 2024 is $7,830 if they have three or more dependents. Below are the 2024 income limits for the credit:
| Number of dependents | Maximum credit | Income limit for Single, Head of Household or Widow status | Income limit for Married Filing Jointly status |
| 0 | $632 | $18,591 | $25,511 |
| 1 | $4,213 | $49,084 | $56,004 |
| 2 | $6,960 | $55,768 | $62,688 |
| 3 or more | $7,830 | $59,899 | $66,819 |
It is also important to note that taxpayers can only claim the EITC if their investment income is within an annual limit. The investment income limitation for 2024 is $11,000.
Changes to tax credits and deductions
In addition to inflation adjustments and the EITC updates this year, other credits will receive expansions and adjustments.
- Child Tax Credit: The refundable portion increased to $1,700.
- Premium Tax Credit: The Inflation Reduction Act is extended through 2025.
- Social Security tax limit: For 2024, the maximum earnings subject to the Social Security payroll tax increased to $168,600.
- Electric Vehicle Credit: Starting in 2024, at least 40% of the battery components must come from North America or specified US Trading Partners. The credit can also be advanced at the point of sale and paid directly to the seller, but it will need to be reconciled on the tax return as a non-refundable credit. Any excess advance credit will need to be repaid.
- Alternative minimum tax (AMT): The Alternative Minimum Tax exemption amount for single and married filing separate taxpayers is $85,700 for 2024 and begins to phase out at $609,350. The AMT exemption for married filing jointly is $133,300 and begins to phase out at $1,218,700.
- Bonus depreciation: The bonus depreciation deduction will be 60% in 2024.
- Gift tax exclusions: The annual gift tax exclusion increased to $18,000 in 2024, and the lifetime exclusion increased to $13.61 million.
- Qualified adoption expenses: The maximum credit for adoption expenses increased to $16,810 for 2024.
Adjustments for retirement accounts for 2024
Your clients who contribute to retirement accounts will see several increases this year.
- 401(k) contributions: Your clients can contribute up to $23,000 to 401(k) plans. If they are 50 or older, they can contribute up to $30,500.
- IRA contributions: The annual contribution limit for IRAs in 2024 is $7,000. If your clients are 50 or older, they can contribute up to $8,000.
- Health flexible spending accounts: Your clients can contribute up to $3,200 in employee salary reductions to fund their health flexible spending arrangement.
Required Minimum Distributions
Effective January 1, 2024, Required Minimum Distributions are required from all retirement accounts (except ROTH accounts) at the following ages.
- 70 ½ if the taxpayer was born before July 1, 1949
- 72 if the taxpayer was born July 1, 1949, to December 31, 1950
- 73 for any taxpayer born between 1951 and 1959.
- 75 for any taxpayer born in 1960 or later.
529 Plans
Effective January 1, 2024, unused funds in 529 Plans are now eligible for a rollover to a ROTH IRA. Here are some guidelines on how your clients can qualify for this rollover.
- Lifetime limit: Your clients can roll over up to $35,000 in their lifetime.
- Annual contribution limit: The amount your clients roll over must be within the annual contribution limit for the Roth IRA. For 2024, the limit is $7,000, or $8,000 for those 50 and older.
- Beneficiary: The Roth IRA must be in the same name as the 529 plan beneficiary.
- Account age: The 529 plan must have been in existence for at least 15 years.
- Rollover funds: The funds rolled over must have been in the 529 plan for at least five years.
- Earned income: The beneficiary must have earned income equal to at least the amount transferred in any year.
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