The IRS has introduced several significant tax law changes for the 2024 tax year that could impact both individuals and businesses. Staying informed about these updates is crucial to maximizing deductions, claiming available credits, and ensuring compliance. At Two Palms Accounting and Tax Solutions, we’re here to break down the key changes and help you navigate their implications.

1. Increased Standard Deductions

For 2024, the IRS has slightly increased the standard deduction to account for inflation. Single filers can now claim $13,850, while married couples filing jointly can claim $27,700. Head of household filers will see a standard deduction of $20,800. These adjustments may influence your decision to itemize or take the standard deduction. If your itemized deductions (e.g., mortgage interest, charitable contributions) are close to these amounts, consult with us to determine the best strategy.

Pro Tip: Keep detailed records of potential itemized deductions throughout the year to make an informed choice during tax season.

2. Adjusted Retirement Contribution Limits

Retirement savings limits have also been updated for 2024. The contribution limit for 401(k) plans has increased to $23,000, with an additional $7,500 catch-up contribution for those aged 50 and older. IRA contribution limits remain at $7,000, with a $1,000 catch-up for those over 50. These changes provide an opportunity to boost your retirement savings while reducing your taxable income. Consider maximizing these contributions, especially if you’re in a higher tax bracket.

3. New Rules for Energy-Efficient Home Improvements

The IRS has expanded tax credits for energy-efficient home improvements under the Inflation Reduction Act. For 2024, homeowners can claim credits for installing energy-efficient windows, doors, skylights, and HVAC systems, with a maximum credit of $3,200 annually. Additionally, credits for solar panels and battery storage systems remain available, covering up to 30% of installation costs. These incentives not only reduce your tax liability but also lower long-term energy expenses.

4. Business-Specific Changes

Business owners should note several updates. The IRS has modified depreciation rules, adjusting the Section 179 deduction limit to $1.16 million for qualifying equipment and property placed in service in 2024. Bonus depreciation continues to phase out, dropping to 60% in 2024 from 80% in 2023. Additionally, certain COVID-era provisions, such as the Employee Retention Credit, are no longer available, requiring businesses to adjust their tax planning. These changes may impact your cash flow and investment decisions, so review them carefully with a tax professional.

Navigating tax law changes can be complex, but understanding their impact is essential for effective financial planning. At Two Palms Accounting and Tax Solutions, we stay up-to-date on IRS regulations to help you take full advantage of deductions and credits. Contact us today to schedule a consultation and ensure your 2024 tax strategy is optimized.