Tax Law Changes & Updates

Stay informed about current tax laws and recent changes affecting your finances

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Understanding Tax Law in 2024

Tax laws are constantly evolving. While major tax reform doesn't happen every year, annual adjustments for inflation and periodic legislative changes can significantly impact your tax situation. This guide covers current tax law provisions, recent changes, and what you need to know for effective year-end planning.

Tax Laws Change Annually

Even without new legislation, many tax provisions adjust annually for inflation. Standard deductions, tax brackets, contribution limits, and phase-out thresholds all increase most years. Staying current with these changes helps you optimize your tax strategy.

2024 Key Tax Numbers

Standard Deduction

  • Single / Married Filing Separately: $14,600
  • Married Filing Jointly: $29,200
  • Head of Household: $21,900
  • Additional for 65+/Blind: $1,950 (married) / $1,550 (unmarried)

Tax Brackets (Single Filers)

  • 10%: $0 to $11,600
  • 12%: $11,600 to $47,150
  • 22%: $47,150 to $100,525
  • 24%: $100,525 to $191,950
  • 32%: $191,950 to $243,725
  • 35%: $243,725 to $609,350
  • 37%: Over $609,350

Tax Brackets (Married Filing Jointly)

  • 10%: $0 to $23,200
  • 12%: $23,200 to $94,300
  • 22%: $94,300 to $201,050
  • 24%: $201,050 to $383,900
  • 32%: $383,900 to $487,450
  • 35%: $487,450 to $731,200
  • 37%: Over $731,200

Retirement Contribution Limits

  • 401(k), 403(b), 457: $23,000 ($30,500 if 50+)
  • IRA (Traditional & Roth): $7,000 ($8,000 if 50+)
  • SIMPLE IRA: $16,000 ($19,500 if 50+)
  • SEP IRA / Solo 401(k): Up to $69,000
  • HSA: $4,150 individual / $8,300 family (plus $1,000 if 55+)
  • FSA: $3,200
  • Dependent Care FSA: $5,000

Alternative Minimum Tax (AMT)

  • Exemption: $85,700 single / $133,300 married
  • Phase-out begins: $609,350 single / $1,218,700 married
  • Rates: 26% and 28%

Gift and Estate Tax

  • Annual gift exclusion: $18,000 per recipient
  • Lifetime exemption: $13.61 million
  • Top rate: 40%

Major Tax Law Provisions Currently in Effect

Tax Cuts and Jobs Act (TCJA) - Extended Through 2025

The 2017 tax reform's individual provisions remain in effect through 2025:

  • Lower tax rates (10%, 12%, 22%, 24%, 32%, 35%, 37%)
  • Higher standard deduction
  • $10,000 cap on SALT (state and local tax) deduction
  • Elimination of personal exemptions
  • Enhanced Child Tax Credit ($2,000 per child)
  • 20% qualified business income (QBI) deduction for pass-through entities
  • $750,000 mortgage interest deduction limit

⚠️ 2026 Sunset Alert

Unless Congress acts, most TCJA individual provisions will expire December 31, 2025. This means starting in 2026:

  • Tax rates will revert to higher 2017 levels
  • Standard deduction will decrease significantly
  • Personal exemptions will return
  • SALT deduction cap will be removed
  • Many taxpayers will see tax increases

Planning Tip: Consider accelerating income into 2024-2025 if you expect higher rates in 2026.

SECURE 2.0 Act (2023)

Significant retirement law changes phasing in over several years:

Changes Already in Effect (2024):

  • RMD age increased to 73: Required minimum distributions now start at age 73 (was 72)
  • Reduced RMD penalties: 25% penalty (down from 50%), reduced to 10% if corrected quickly
  • QCD limit indexed: Qualified Charitable Distributions indexed for inflation ($105,000 in 2024)
  • 529 to Roth conversions: Can roll unused 529 funds to Roth IRA (subject to limits)
  • Emergency savings: New penalty-free withdrawal rules for emergencies
  • Student loan matches: Employers can match employee student loan payments with retirement contributions

Coming Changes:

  • 2025: RMD age increases to 75
  • 2025: Catch-up contributions: $10,000 for ages 60-63 in 401(k)
  • 2026: Auto-enrollment: New 401(k) plans must auto-enroll employees

Energy Tax Credits (Inflation Reduction Act)

Enhanced and extended through 2032:

  • Residential Clean Energy Credit: 30% for solar, wind, geothermal, battery storage
  • Energy Efficient Home Improvement Credit: Up to $3,200 annually
    • Windows, doors, insulation: Up to $1,200
    • Heat pumps, heat pump water heaters: Up to $2,000
    • Home energy audits: Up to $150
  • Clean Vehicle Credit: Up to $7,500 for new electric vehicles
  • Used Clean Vehicle Credit: Up to $4,000 for used EVs

What's NOT Changing (Common Misconceptions)

Tax Myths vs. Reality

Myth: "I need to own a home to get tax benefits"

Reality: The high standard deduction means most homeowners don't benefit from itemizing mortgage interest. You can build wealth regardless of homeownership status.

Myth: "Getting a raise will put me in a higher bracket and I'll make less money"

Reality: Tax brackets are marginal. Only income above the bracket threshold is taxed at the higher rate. You always keep more money when earning more.

Myth: "I can deduct anything work-related"

Reality: W-2 employees can no longer deduct unreimbursed employee expenses. Only self-employed individuals can deduct business expenses.

Myth: "I should maximize my refund"

Reality: A large refund means you overwithhe ld all year—giving the government an interest-free loan. Optimize withholding for more cash flow throughout the year.

State Tax Considerations

State Income Tax Landscape

State tax laws vary significantly:

  • No income tax states (9): Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming
  • Flat tax states: Increasing number adopting flat rates
  • Progressive tax states: Tax rates increase with income
  • SALT cap impact: $10,000 federal deduction limit particularly affects high-tax states (CA, NY, NJ, CT)

Other State Tax Changes to Watch

  • Remote work taxation rules
  • Conformity with federal tax code
  • State-specific credits and deductions
  • Property tax relief programs

Planning for Potential Future Changes

What Congress May Consider

Potential tax legislation being discussed:

  • TCJA extension: Extending 2017 tax cuts beyond 2025
  • Child Tax Credit expansion: Increasing amounts or income limits
  • Capital gains changes: Potential rate increases for high earners
  • Estate tax: Reducing the exemption amount
  • Retirement account changes: Further modifications to RMD rules

Strategies for Uncertain Tax Environment

  • Diversify tax treatment: Mix of traditional and Roth accounts
  • Consider Roth conversions: While rates are relatively low
  • Accelerate income if beneficial: If expecting higher future rates
  • Maximize current benefits: Use provisions while they're available
  • Stay flexible: Don't over-optimize for current law that may change

Where to Find Reliable Tax Information

Official Sources

  • IRS.gov: Tax forms, publications, and guidance
  • IRS Tax Withholding Estimator: Calculate proper withholding
  • IRS Free File: Free tax preparation for eligible taxpayers
  • Publication 17: Comprehensive guide for individual taxpayers
  • Publication 334: Tax guide for small businesses

When to Seek Professional Help

Consider consulting a tax professional if you:

  • Have complex investment portfolios
  • Own a business or rental property
  • Have multi-state income
  • Experienced major life changes
  • Face an audit or tax controversy
  • Have stock options or restricted stock
  • Made large charitable contributions
  • Have international income or accounts

Stay Informed, But Don't Over-Optimize

Tax laws will always change. The best strategy is to understand current rules, take advantage of available benefits, but avoid making major life decisions based solely on tax implications. Focus on sound financial fundamentals—building wealth, saving for retirement, managing debt—and let taxes be one factor among many in your decision-making.

Need Current Tax Law Guidance?

Tax professionals stay updated on the latest changes and can help you navigate complex situations. If your tax situation involves anything beyond straightforward W-2 income, professional guidance often pays for itself many times over through proper planning and optimization.