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Tax Updates 2024 – What’s Changed for the 2023 Annual Income Tax Filing

Debt.com » How to File Taxes » Tax Updates 2024 – What’s Changed for the 2023 Annual Income Tax Filing

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There are four fairly new tax updates to know before filing your taxes this year. One could equal a $7,500 tax credit for buying a Tesla last year.

And that’s just the biggest tied to the Inflation Reduction Act. There are more, but these are four IRS updates that will have the biggest impact on your 2024 tax return:

  • Energy tax credits
  • Expected changes to Form 1099-K have been delayed
  • Larger standard deductions
  • Adjustment to federal income tax brackets

Taxpayers filing income tax returns by April 15 need to understand these updates to file taxes correctly and avoid issues with the IRS.

Tax breaks for energy reduction

It’s called “The Energy Efficient Home Improvement Credit.” As part of the Inflation Reduction Act, tax filers who added solar panels to generate electricity or purchased an Electric Vehicle may qualify for a tax credit.

That credit can be as large as $7,500 for those who purchased EVs in 2023. Tesla and Volkswagen EV owners will likely see the largest “dollar-for-dollar reduction of their owed income tax.” Check FuelEconomy.gov to see if your EV qualifies.

It’s worth checking with your tax preparer or checking the IRS website when you go to file this year. “If you make qualified energy-efficient improvements to your home after Jan. 1, 2023, you may qualify for a tax credit up to $3,200.”[1]

Something as simple as a home energy audit qualifies for a $150 credit. A maximum credit of $3,200 may be applied to those who “installed electric or natural gas heat pump water heaters, and electric or natural gas heat pumps.” One major qualifier is it has to be your primary residence – or the place you live the majority of the year. Sorry, landlords. This credit won’t help you.

Delays to Form 1099-K reporting

For years, the IRS has been teasing out new changes to the amount of income side hustlers and freelancers need to report.[2] Businesses earning even a single payment of $600 payment apps made using a third-party platform like PayPal or Venmo would need to report it using Form 1099-K. However at the end of 2023, the tax organization announced “a delay, following feedback from taxpayers, tax professionals, and payment processors.”

Changes to standard deductions

In October 2022, the IRS announced “tax year 2023 adjustments that apply to tax returns filed in 2024.”[3]

This year, the standard deduction for married couples who file jointly rises to $27,700, which is up $1,800 from 2022. If you are filing as a single taxpayer or if you are married filing separately, the standard deduction rises to $13,850, up $900 from the prior year. And for heads of households, the standard deduction will be $20,800, which is up $1,400 from 2022.

2023 tax brackets: Taxes due in April 2024

Depending on how much you earn (tax bracket) is the percentage of earnings you’re taxed on (tax rate).

Tax rates won’t change this year, but those seven tax brackets have shifted. However, to keep up with inflation, the IRS has increased income brackets. You can learn what the 2023 income tax brackets are here.

Public Service Loan Forgiveness

This one isn’t a new change but it will still qualify this tax-filing year.

If you’re employed by a federal, state, local, or tribal government or a non-profit organization, you may qualify for the Public Service Loan Forgiveness Program. The way the PSLF Program works is after you have made 120 monthly payments (or 10 years of payments) under a repayment plan while working full-time for a qualifying employer, you may be forgiven for the remaining balance on your direct loans.

In 2021, the government passed legislation that makes all student loan forgiveness tax-free through 2025. Further, for anyone who receives forgiveness through PSLF (Public Service Loan Forgiveness), the forgiven amount is tax-free regardless of when it was forgiven.

This hasn’t changed since and you may still qualify.

Tips for filing taxes

Now that you know what’s changed since last year, here are four quick tips to make filing your return a breeze…

1. How to do your taxes for free

If you make $60,000 or less per year, have a disability, or speak limited English, you might qualify for free tax preparation through an IRS program called Volunteer Income Tax Assistance. The only catch is you have to go in person, but you can search for an IRS-certified tax helper by zip code right here.

If your household income is $73,000 or less, you have the Free File option. Also, tax filers over 60 can get some free tax help from another IRS program called Tax Counseling for the Elderly. Through TCE, organizations like AARP offer tax preparation and help with confusing tax questions.

2. How do I know if I owe the IRS money?

You can use Debt.com’s Free Income Tax Calculator to project exactly what you’ll owe on your 2023 taxes.

You’ll need the most recent paycheck stub for everyone on your return, and the tax return you completed the year before to guide you in estimating your deductions and credits. The final result even instructs you about how to fill out your Form W-4 for withholding.

Take that to your human resources department or fill out the form on your company payroll site, and you can avoid owing a big tax bill next year.

3. How to file as a “gig worker”

Many gig workers paid through apps like Venmo, PayPal, and CashApp may have lucked out again this year. The IRS planned on making 2023 the tax filing year (returns due by April 15, 2024) where any side income earnings over $600 were going to receive a 1099-K. In November 2023, the IRS announced it would delay the rollout until 2024 (returns are due April 15 2025).

It’s nothing to be ignored. The IRS made the move with the intent of easing the new filing process for gig workers.

Contract and freelance workers typically receive a 1099-MISC for earnings over $400. Those workers should pay taxes quarterly to avoid a penalty at the end of the year.

Many experts advise setting aside 25 to 30 percent of your quarterly earnings to pay the IRS every three months. The IRS provides Form 1040 as a tool to calculate your taxable earnings.

4. How to get a tax extension

Can’t afford to pay your taxes by the April 15th deadline? You can get a six-month extension to file your taxes.

It doesn’t get you off the hook for unpaid taxes, though. So if you owe Uncle Sam, you should pay what you can before Tax Day. (If you overpay, you’ll be able to mention that when you do file the paperwork, and you’ll get a refund.)

If you haven’t paid in full by the April 15 deadline, you’ll be hit with interest charges on the unpaid amount.

If you’re curious about when you’ll get your money, check out Debt.com’s in-depth report Where’s My Tax Refund?

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