As we step into 2025, it’s important to stay informed about the latest tax changes that could impact your return. From updated tax brackets to new rules for deductions and credits, understanding these changes can help you prepare effectively and avoid surprises. At Simply Balanced Accountants, we’re here to break it all down for you.
1. Updated Tax Brackets
The IRS adjusts tax brackets annually for inflation, and 2024 was no exception. These changes can impact how much of your income is taxed at different rates. Here are the new brackets for single filers and married couples filing jointly:
• Single Filers
• 10%: Up to $11,600
• 12%: $11,601 to $47,800
• 22%: $47,801 to $102,900
• 24%: $102,901 to $180,500
• 32%: $180,501 to $231,200
• 35%: $231,201 to $578,100
• 37%: Over $578,100
• Married Filing Jointly
• 10%: Up to $23,200
• 12%: $23,201 to $95,600
• 22%: $95,601 to $205,800
• 24%: $205,801 to $361,000
• 32%: $361,001 to $462,400
• 35%: $462,401 to $693,750
• 37%: Over $693,750
If your income hasn’t changed, you might find yourself in a slightly lower tax bracket due to inflation adjustments.
2. Standard Deduction Increases
The standard deduction has increased for the 2024 tax year:
• Single Filers: $14,600 (up from $13,850)
• Married Filing Jointly: $29,200 (up from $27,700)
• Heads of Household: $21,900 (up from $20,800)
If you typically take the standard deduction, these increases mean more of your income will be shielded from taxes.
3. Expanded Retirement Contribution Limits
Planning for retirement just got a little easier with higher contribution limits:
• 401(k): Contribution limit increases to $23,000, with an additional $7,500 catch-up contribution for those 50 and older.
• IRA: Contribution limit rises to $7,000, with an additional $1,500 catch-up contribution.
These increases provide a great opportunity to reduce your taxable income while securing your financial future.
4. New Energy Credits and Incentives
If you’ve made energy-efficient upgrades to your home, you could qualify for enhanced credits:
• Energy Efficient Home Improvement Credit: Covers up to 30% of the cost of eligible upgrades like windows, insulation, and HVAC systems, with a maximum credit of $1,200.
• Residential Clean Energy Credit: Offers a 30% credit for installing solar panels or other renewable energy systems, with no cap on the amount.
5. Changes to the Child Tax Credit
The Child Tax Credit returns to its pre-pandemic rules:
• Credit is $2,000 per qualifying child under age 17.
• Refundable portion is capped at $1,600.
If you relied on expanded credits in recent years, this may result in a smaller refund for 2024.
6. Capital Gains Tax Updates
The capital gains tax thresholds have also been adjusted:
• 0% Rate: Single filers with taxable income up to $47,800; married filers up to $95,600.
• 15% Rate: Income above these thresholds, up to $518,400 (single) or $1,036,800 (married).
• 20% Rate: Income above the 15% threshold.
If you’re planning to sell investments or property, understanding these rates is crucial.
7. What You Can Do to Prepare
• Organize Your Records Early: Make sure you have all relevant documents, including income statements, receipts, and proof of credits or deductions.
• Maximize Contributions: Take full advantage of higher retirement limits before the April 15 deadline.
• Work with a Tax Professional: The changes can be complex, and professional guidance ensures you don’t miss opportunities to save.
How Simply Balanced Accountants Can Help
At Simply Balanced Accountants, we specialize in helping individuals and small businesses navigate tax season with confidence. Our tax planning services ensure you’re fully prepared to maximize savings and minimize liabilities.
Ready to file with peace of mind?
• Visit: www.simplybalancedaccountants.com
• Call: 517-897-2144
• Email: connect@simplybalancedaccountants.com
Let us handle the changes so you can focus on what matters most.
