If there’s one thing you can depend on when it comes to taxes, it’s that at least some of the rules, exemptions and deductions are sure to change every year. This year was no exception, as many things have changed for 2023 taxes being filed by April 2024. So before you start pulling together the return you’ll be filing in 2024, make sure you’re up-to-date on current tax laws.
Do you have questions about tax planning? Speak with a financial advisor who serves your area today.
Deadlines for Filing Returns and Extensions
Tax filing day in 2024 falls on Monday, April 15.
For residents of Maine and Massachusetts, there’s some extra time available to file. If you live in either of these states, you’ll have until April 17 to file, as April 15 and April 16 are both state holidays.
If you file for a tax extension, the deadline for both individual and self-employed filers is October 15. However, an extension gives you more time to file, not more time to pay. You’ll still need to make at least an estimated tax payment by April 15 or face significant penalties.
‘Tax Season’ vs. ‘Tax Year’: What’s the Difference?
What’s called “tax season” is the time of year for preparing and filing your return for the previous calendar year. This typically runs from early January to April 15. Now is when you’ll also receive W2s, 1099s and other income statements needed for filing your return.
On the other hand, the “tax year” is the calendar year in which you earn your taxable income, despite the fact that you file it the following year. In turn, tax year 2023 would be paid by April 15, 2024. This will involve any income earned and other financial transactions during the tax year covered in the return you file during the “tax season.”
Inflation-Adjusted Tax Brackets
The IRS automatically adjusts tax brackets each year to account for inflation. Otherwise, you’d be paying an increasingly higher marginal tax rate every year. In 1978, for example, a married couple making $11,200 found themselves in the 22% bracket, while they’d need to earn $89,450 to hit that rate for 2023.
Here’s a breakdown of the new brackets for the 2023 tax year for both single and joint filers:
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Single filers
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10% bracket: income of $11,000 or less
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12% bracket: income over $11,000
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22% bracket: income over $44,725
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24% bracket: income over $95,375
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32% bracket: income over $182,100
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35% bracket: income over $231,250
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37% bracket: income over $578,125
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Joint filers
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10% bracket: income of $22,000 or less
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12% bracket: income over $22,000
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22% bracket: income over $89,450
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24% bracket: income over $190,750
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32% bracket: income over $364,200
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35% bracket: income over $462,500
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37% bracket: income over $693,750
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Inflation-Adjusted Standard Deductions
The standard deduction saw a big increase several years ago, which makes itemizing deductions unnecessary for many filers. For the 2023 tax year, the adjusted standard deductions are as follows:
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$13,850 for single filers
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$27,700 for married couples filing jointly
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$13,850 for married couples filing separately
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$20,800 for heads of household
Taxes for Restarted Student Loan Payments
The interest on most student loans is tax-deductible, so if you resumed making loan payments after the pandemic pause ended, remember to total the amount of interest you paid up until Dec. 31, 2023.
Up to $2,500 of student loan interest is deductible every year and you don’t have to itemize to claim it. Instead, the deduction is taken as an income adjustment on Schedule 1. Those adjustments result in a dollar-for-dollar cut to your tax bill, which could be very valuable depending on how much you paid.
Electric Vehicle Credits
Automakers call EVs the car of the future. If you purchased an EV in the past 12 months, you can claim a federal tax credit of up to $7,500 for a new electric vehicle, or up to $4,000 for a used EV. Because it’s free money – like the student loan interest deduction – that reduces your total tax bill, there are restrictions of course.
First, your modified adjusted gross income (MAGI, for short) must be below the following thresholds:
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$300,000 for married couples filing jointly
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$225,000 for heads of household
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$150,000 for all other filing statuses
The individual vehicle also must qualify for the deduction, which you can check here.
Tips for Filing Your Taxes
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If you want to get the most benefit out of planning your taxes, consider working with a professional. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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During the months in between tax time, use SmartAsset’s paycheck calculator to get an idea of how much taxes will eat into your pay. Knowing this can help you build a budget and a financial plan.
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Source: finance.yahoo.com