It's time to pay the tax man and there are some relatively small changes for tax year 2024.
Standard Deduction
You will be able to deduct a little more with the standard deduction. The standard deduction increases to $14,600 for single filers and married couples filing separately and to $21,900 for single heads of household, who are generally unmarried with one or more dependents. For married couples filing jointly, the standard deduction rises to $29,200.
Child care tax credit
In 2024, the Child Tax Credit is $2,000 per child age 17 or younger. The credit is also subject to a phase-out starting at $400,000 for joint filers and $200,000 for single filers. For other qualified dependents, you can claim a $500 credit.
Estate Tax Exemption
Another increase due to inflation is the estate and gift tax exemption. The estate tax exemption is important for those with large estates. The gift and estate tax exemption allows people to transfer wealth to the next generation. The exemption for tax year 2024 is $13.6 million, but that will decrease to just over $5 million if Congress doesn't extend the exemption. For those with large estates, consulting a financial advisor is essential this year.
IRA and 401(k) limits
For 2024 limits have increased slightly. You can contribute up to $7,000 to an IRA and those age 50 or older can make an additional $1,000 catch-up contribution. The contribution limits for tax-deferred 401(k) and Roth 401(k) contributions have to increased to $23,000.
Required Minimum Distribution
If you are age 73 or older, be sure you have taken the required minimum distribution (RMD) from your retirement accounts before the end of the year. If you do not, you will face a 25 percent penalty on undistributed funds. If it is your first RMD you can wait until April 2025.