Updates That Could Influence Your Tax Planning Strategies.

As we move through the second half of 2024, staying informed about the latest developments in tax updates is essential for individuals and businesses alike to have the most effective tax planning strategies.

Recent changes introduce adjustments designed to address the current economic picture and encourage strategic financial decisions. From measures aimed at mitigating inflationary pressures to incentives promoting investments in sustainable technologies and business innovation, recent updates offer opportunities for thoughtful planning and adaptation.

Join us as we delve into some pivotal shifts that could impact your tax planning strategies and decisions for the rest of 2024.

Potential Changes to Your Tax Planning Strategies

Tax Brackets and Standard Deduction:

In response to inflation, the IRS has adjusted tax brackets and the standard deduction. For 2024, the standard deduction has increased to $13,850 for single filers and $27,700 for married couples filing jointly. 

Inflation can push incomes into higher tax brackets over time, leading to higher taxes. A higher standard deduction means that more income can be shielded from taxes. 

IRA and Retirement Contribution: 

The income phase-out ranges for Roth IRA contributions have increased. The contribution limit for traditional and Roth IRAs is $7,000, with an additional $1,000 catch-up contribution for those aged 50 and older. 

The increase in income phase-out ranges for Roth IRA contributions expands access to valuable tax benefits and retirement savings opportunities. It allows more individuals, including those with higher incomes, to incorporate Roth IRAs into their overall tax planning strategies, potentially enhancing retirement readiness and tax efficiency.

Child Tax Credit:

The child tax credit has been expanded temporarily. The maximum refundable credit will increase to $1,900 in 2024 and $2,100 in 2025.

For families, this increase means potentially higher refunds or reduced tax liabilities, which can be strategically utilized to bolster savings, invest in education funds, or contribute to retirement accounts.

Electric Vehicle (EV) Tax Credit:

In an effort to promote the transition to sustainable technologies, a significant change is the ability to monetize the $7,500 federal EV tax credit at the point of sale, rather than waiting to claim it on a tax return. 

For individuals and businesses engaged in tax planning strategies, this immediate credit can be strategically advantageous, as it effectively lowers the net cost of acquiring an electric vehicle, aligning financial incentives with sustainable technology adoption goals. 

Business Deductions:

The limitation on business deductions for net interest expense has been adjusted to be less restrictive, reverting to a 30% limit based on EBITDA rather than EBIT for 2024 and 2025​. 

This change is particularly advantageous for businesses with substantial depreciation and amortization expenses, allowing them to deduct more interest against their taxable income, thereby reducing their tax burden.

Health Savings Accounts (HSAs):

Higher contribution limits for Health Savings Accounts allow contributions up to $4,150 and families up to $8,300​. 

This flexibility not only supports immediate healthcare needs but also enhances long-term financial planning by leveraging the tax benefits of HSAs effectively.

Let’s Solidify Your Tax Planning Strategies

As we move forward through 2024, understanding and leveraging tax law changes can empower informed decision-making and educated planning when it comes to your tax planning strategies. 

As always, we advise you to consult with your tax professional to maximize your contributions. 

For the most accurate and up-to-date information for your tax planning strategies, schedule a brief meeting with us today by emailing Matt@JTMWilliams.com or call/text 703.782.3110.

With offices in Alexandria, Virginia, and Bridgeport, West Virginia, JTM welcomes you to make an appointment to discuss your tax strategies and financial picture with us in person.