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Tax Season 2024: What You Need to Know (and Looking Ahead to 2025)

Tax Season 2024: What You Need to Know (and Looking Ahead to 2025)

| December 30, 2023

Well. It’s about that time of the year again—tax season. Groan. Some new things this year include an increased standard deduction, adjusted tax brackets, and some key changes to common tax credits and deductions.

We’ll dig into all those changes, plus a few more. First, let’s kick things off with the main details you need to know for the 2024 tax season:

But that’s just scratching the surface! Let’s break down the details so you can file your taxes with confidence this year.

When Can I File My Taxes?

Tax season typically starts at the end of January, which means you should see a W-2 form from your employer in your mailbox by the end of the month.1 Since many employers use a digital payroll system for direct deposit, you might also find your W-2 online. Freelancers should also be on the lookout for a 1099 form from each of their clients.

Here are a few other tax forms you might need:

  • Mortgage interest statements
  • Investment income statements
  • Charitable contribution statements

Now’s also a great time to gather your receipts (you kept those, right?) if you plan on itemizing your deductions so you’re not scrambling and pulling your hair out by the time April rolls around.

Once you have these forms gathered and organized, you’ve got the green light to file your taxes. If you’re not sure you have everything you need, you’ll want to reach out to a tax pro—especially if you have a complicated tax situation.

Tax Year vs. Tax Season

Before we dive into tax brackets, let’s talk some lingo. You’ll often hear the phrases tax year and tax season. These are not the same thing.

The tax year is the actual year where you earn money, pay income taxes, make charitable contributions, work side gigs, etc. The tax season is when you file, report and pay any taxes owed from the last year.

So, during the 2024 tax season, you file taxes for the 2023 tax year. Got it? Keep that in mind whenever we’re talking about the tax season or tax year. It’s important!

Income Brackets and Rates for the 2024 Tax Season

Here’s a refresher on how income brackets and tax rates work: Your tax rate (the percentage of your income you pay in taxes) is based on what tax bracket (income range) you’re in.

For example, if you’re single and your income is $75,000, then you’re in the 22% tax bracket. But that doesn’t mean your tax rate is a flat 22%. Instead, part of your income is taxed at 10%, another part at 12%, and the last part at 22%.

For the 2024 tax season, the tax brackets went up a few hundred dollars to account for inflation. Here’s a look.

Tax Season 2024 Marginal Income Tax Rates and Brackets

Marginal Tax Rates

Single Tax Bracket

Married Filing Jointly Tax Bracket

Head of Household Tax Bracket

Married Filing Separately Tax Bracket

10%

$0–11,000

$0–22,000

$0–15,700

$0–11,000

12%

$11,000–44,725

$22,000–89,450

$15,700–59,850

$11,000–44,725

22%

$44,725–95,375

$89,450–190,750

$59,850–95,350

$44,725–95,375

24%

$95,375–182,100

$190,750–364,200

$95,350–182,100

$95,375–182,100

32%

$182,100–231,250

$364,200–462,500

$182,100–231,250

$182,100–231,250

35%

$231,250–578,125

$462,500–693,750

$231,250–578,100

$231,250–346,875

37%

Over $578,125

Over $693,750

Over $578,100

Over $346,875

Higher Standard Deductions in the 2024 Tax Season

When you pay taxes, you have the option of taking the standard deduction or itemizing your deductions (calculating your deductions one by one). Itemizing is more of a hassle, but it’s worth it if your itemized deductions add up to more than the standard deduction.

For the 2024 tax season, the standard deduction went up to adjust for inflation. To get a good idea of just how much the standard deduction increased, let’s compare the 2024 standard deduction to the numbers we saw in 2023.

Standard Deduction

Filing Status

Tax Season

2023

Tax Season

2024

Single

$12,950

$13,850

Married Filing Jointly

$25,900

$27,700

Married Filing Separately

$12,950

$13,850

Head of Household

$19,400

$20,800

Tax Deductions and Credits to Consider for Tax Season 2024

The closest things to magic words when it comes to taxes are deductions and credits. Both help you keep more money in your pocket instead of Uncle Sam’s, but in slightly different ways.

Tax deductions help lower the amount of your income that can actually be taxed. Some deductions are only available if you itemize your deductions, while others are still available even if you decide to take the standard deduction.

Tax credits, on the other hand, are dollar amounts actually subtracted from your tax bill, and there are two types: refundable and nonrefundable. If a credit is greater than the amount you owe and it’s a refundable credit, the difference is paid to you as a refund. Score! If it’s a nonrefundable credit, your tax bill will be reduced to zero, but you won’t get a refund. Still a win!

Here are some potential deductions and credits you might be able to claim on your tax return this year. But while it’s never too early to start planning for taxes, the IRS doesn’t always follow our schedule. So, keep in mind that the details below could change as the 2024 tax season approaches.

1. Charitable Deductions

You can deduct charitable contributions you made during tax year 2023 as long as you itemize your deductions and donate to qualified organizations. The limit for charitable deductions is 60% of your adjusted gross income (AGI). By the way, AGI is your total income minus other deductions you’ve already taken.

2. Medical Deductions

If you found yourself with hefty medical bills in tax year 2023, you might be able to find at least some tax relief.

You can deduct any medical expenses above 7.5% of your adjusted gross income (AGI). For example, if your AGI was $100,000, you can deduct out-of-pocket medical expenses above $7,500 in tax season 2024. But you have to itemize your deductions in order to write off those expenses on your tax return.

3. Business Deductions

If you’re self-employed, there are a bunch of deductions you can claim on your tax return—including travel expenses and the home office deduction if you use part of your home for business purposes.

But if you’re one of the millions of people who work remotely, you won’t be able to claim the home office deduction since it’s reserved for self-employed people only. Sorry!

4. Earned Income Tax Credit (EITC)

This one’s a biggie. The EITC is a refundable credit designed to help out low- and middle-income households. To qualify for the credit in tax season 2024, a single filer with no children must have an AGI below $17,640, while the cap for a married couple with three or more children is $63,398.

Maximum Adjusted Gross Income Limits

Dependents Claimed

Single, Head of Household or Widowed

Married Filing Jointly

0

$17,640

$24,210

1

$46,560

$53,120

2

$52,918

$59,478

3 or more

$56,838

$63,398

 

And here’s the maximum EITC credit amounts you can get based on your AGI and number of qualifying dependents:

Maximum EITC Credit Amounts

Qualifying Dependents

Maximum Credit Amounts

0

$600

1

$3,995

2

$6,604

3 or more

$7,430

 

You cannot claim the EITC in tax season 2024 if you have investment income over $11,000 or if you’re married filing separately.

Depending on your income, your filing status and number of dependents, the credit could save you anywhere from a few hundred to a few thousand dollars on your taxes.

 

5. Child Tax Credit

Got kids? Well, here’s a tax credit just for you! The child tax credit (CTC) lets you credit up to $2,000 per dependent child under the age of 17. The income limit is $400,000 for married filing jointly and $200,000 for all the others. The CTC is also partially refundable up to $1,600.

6. Child and Dependent Care Credit

This is another great credit parents and guardians should know about. The child and dependent care credit is a nonrefundable credit that allows taxpayers to offset some of the costs of paying for services like babysitters, day care and in-home caregivers for older dependents.

Here’s how it works: You can claim 20–35% of up to $3,000 ($6,000 for two or more dependents) for the cost of care. The percentage of the credit depends on your AGI. Families with an AGI of $15,000 or less can claim the full 35%. As you earn more income, the credit is reduced. But a family with an AGI of over $43,000 can still claim the minimum credit rate of 20%.

Let’s break it down. You pay $250 a week for Junior to go to day care. That’s about $13,000 a year (ouch). If you qualify to credit 20% of $3,000 in care costs, you get $600 knocked off your tax bill. Not too shabby!

7. Education Credits

Bettering yourself or your children through education is a good thing, and it’s even better when you get a tax break.

The American opportunity tax credit (AOTC) is a partially refundable credit that pays for education expenses for students in the first four years of college. You can claim up to $2,500 per student—and if the credit brings your tax bill to zero, 40% (up to $1,000) will be refunded to you.

Another education credit is the lifetime learning credit (LLC). This one isn’t refundable, but it covers up to $2,000 in qualified educational expenses per return. While you can only take advantage of the AOTC for undergrad expenses, you can reap the benefits of the LLC for expenses related to all kinds of educational opportunities—from degree programs to technical classes to improving job skills.

But beware: You can claim both the AOTC and the LLC on your tax return—but not for the same student or the same expenses.

You also may be eligible for a tax deduction (up to $2,500) for interest you’ve paid on student loans. Now, the student loan interest deduction is definitely not a reason to keep student loans around if you currently have them since the deduction is basically a small refund of what you’ve already paid—it’s not free money.

So, you should still pay off your student loans as soon as possible. But if you do still have student loans and you’re working hard to pay them off, this deduction could be a nice bonus.

8. Inflation Reduction Act Credits

The Inflation Reduction Act, a bill that President Joe Biden signed into law in 2022, includes several tax credits that’ll launch during tax season 2024. While most of them only apply to big businesses (and we’re talking really big—those with over $1 billion in revenue), there are two potential credits for individuals.

First, the Inflation Reduction Act offers a credit (up to $7,500) to certain people who’ve recently purchased a new or used electric vehicle. It also offers a credit for folks who’ve made energy improvements to their homes—things like adding solar power generators and water heaters.

Just remember, a tax credit or deduction is never a reason to go out and make a purchase. But if you were already planning (and budgeting) to buy an electric vehicle or make energy improvements to your home, you could be eligible for a nice bonus when you file your taxes.

1099-K Changes Incoming

If you frequently sell goods or services online as a side hustle, you may have been warned about extra taxes coming your way when you file in 2024 thanks to new rules surrounding 1099-K forms. Well, we’ve got some good news: There’s no need to worry, at least for now.

That’s because the new 1099-K policies that the IRS planned to begin enforcing during 2024 tax season—ones that would’ve affected a lot of folks who earn some extra income through sites like Etsy, eBay and Fiverr—have officially been delayed, meaning they won’t take effect until at least tax season 2025.

For now, a 1099-K form will continue to only be required if you have more than 200 third-party business transactions a year and they added up to more than $20,000 of income. But the IRS is planning to make things a lot different in the 1099-K department down the road.

Here’s how it’ll break down when the new policy kicks in: You’ll receive a 1099-K form during tax season if you accept payments for goods or services over a third-party network (think Venmo, PayPal, Stripe, Square, Zelle and Cash App) that are more than $600, even if it’s just one transaction over $600!

Retirement Plans: 401(k)s, IRAs and More

There are several key changes and inflation adjustments to retirement plans—and some of those changes could impact your tax bill in 2024. Let’s dive in.

401(k) and IRA Contribution Limits Increase

To account for inflation and an increased cost of living, the IRS bumped up 401(k) and IRA retirement plan contribution limits for tax year 2023:

  • If you contribute to a 401(k) or 403(b), you can now put in up to $22,500 a year (up from $20,500). You can also contribute an extra $7,500 as a catch-up contribution if you’re 50 or older.
  • If you have a traditional or Roth IRA, you can now contribute up to $6,500 (up from $6,000). If you’re 50 or older, you can put in an extra $1,000.

Income Limits Increase for Roth IRA Contributions

The Roth IRA income limits for contributions also went up in tax year 2023:

  • Single and head of household: You can contribute up to the limit if you make less than $138,000, a reduced amount between $138,000 and $153,000 (up from between $129,000 and $144,000), and nothing after $153,000. 
  • Married filing jointly: You can contribute up to the limit if you make less than $218,000, a reduced amount between $218,000 and $228,000 (up from between $204,000 and $214,000), and nothing after $228,000. 
  • Married filing separately: Here's where it gets a little tricky. If you lived with your spouse for any amount of time during the year and your income is more than $10,000, you won't be able to contribute anything to a Roth. But if you didn’t live with your spouse at all, you'll have the same contribution limits as a single or head of household taxpayer (see above).

Deduction Limits Increase for Traditional IRA Contributions

Remember this for the 2024 tax season: Phase-out limits for deducting traditional IRA contributions are increasing. What are phase-out limits? It simply means that your deduction gets lower as your income gets higher.

You can take a full deduction up to the limit ($6,500 for most folks and $7,500 if you’re 50 or older) if neither you nor your spouse participate in an employer-sponsored plan. Cha-ching! If you do contribute to an employer-sponsored plan, the deduction phases out as your income increases depending on your filing status:

  • Single: You get a full deduction if your income is less than $73,000. You can take a partial deduction if your income is between $73,000 and $83,000. The deduction phases out completely if you make more than $83,000.
  • Married filing jointly: You get a full deduction if you make less than $116,000. If your income is between $116,000 and $136,000, the deduction is only partial. Couples making more than $136,000 get no deduction.
  • Married filing separately: You get a partial deduction if you make less than $10,000. There’s no deduction if you make more than $10,000.

If you’re not covered by an employer-sponsored plan at work but your spouse is, you’ll need to file jointly to get the deduction. You can take a full deduction if you make less than $218,000, a partial deduction if you make between $218,000 and $228,000, and no deduction if you make more than $228,000.

Need help navigating retirement plans? It’s probably a good idea to reach out to an investment professional who can walk you through the process.

Looking Ahead to Tax Season 2025

Are you a super nerd who’s way ahead of the game and already looking ahead to tax season 2025? Then you should give yourself a pat on the back—that’s awesome!

To give you an idea of what to expect down the road, here’s a look at the new income tax rates and brackets you’ll run into when you pay taxes in 2025.

Tax Season 2025 Marginal Income Tax Rates and Brackets

Marginal Tax Rates

Single Tax Bracket

Married Filing Jointly Tax Bracket

10%

$0–11,600

$0–23,200

12%

$11,600–47,150

$23,200–94,300

22%

$47,150–100,525

$94,300–201,050

24%

$100,525–191,950

$201,050–383,900

32%

$191,950–243,725

$383,900–487,450

35%

$243,725–609,350

$487,450–731,200

37%

Over $609,350

Over $731,200

File Your Taxes With Confidence in 2024

Win with taxes (and avoid costly mistakes) when you do your taxes the Ramsey way. Ramsey SmartTax is the no-nonsense tax software you can trust. It’s simple to use with no hidden fees and no hidden agenda. It’ll even teach you along the way so you feel empowered to do your own taxes with confidence.

And unlike the folks at the IRS, our product specialists will answer your calls and serve you with excellence if you need any help along the way. You definitely won’t get that with IRS Free File!

File your taxes with Ramsey SmartTax!

But what if you have a more complicated tax situation or had a wild year in 2023? In that case, working with a tax pro is a smart move. And if you’re looking for a trustworthy tax professional in your area, try one of our RamseyTrusted tax pros. They know the tax code inside and out so you don’t have to.