What's New For 2024
The provisions that go into effect starting with tax year 2025 include:
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A new income tax deduction for qualified tips—available to itemizing and non-itemizing taxpayers;
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Tips are subject to income and payroll taxes. Employees (and the self-employed) may deduct up to $25,000 of qualified tips received in occupations that are listed by the IRS as customarily and regularly receiving tips on or before Dec. 31, 2024, and that are reported to the employer or the IRS.
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A new income tax deduction for qualified overtime compensation—available to itemizing and non-itemizing taxpayers;
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Overtime compensation is subject to income and payroll taxes.
Individuals (employees and other workers) may deduct up to $12,500 ($25,000 if married filing jointly) of qualified overtime compensation.
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A new income tax deduction for qualified passenger vehicle loan interest paid on a loan that you took out in 2025 for the purchase of an applicable passenger vehicle—available to itemizing and non-itemizing taxpayers;
Individuals may deduct interest paid on a loan originated after Dec. 31, 2024, and used to purchase an applicable passenger vehicle for personal use, and that meets other eligibility criteria (lease payments do not qualify).
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An enhanced income tax deduction for seniors—available to itemizing and non-itemizing taxpayers;
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Individuals may deduct interest paid on a loan originated after Dec. 31, 2024, and used to purchase an applicable passenger vehicle for personal use, and that meets other eligibility criteria (lease payments do not qualify).
An increase in the standard deduction;
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The standard deduction has increased to the following amounts:
$31,500 (up from $30,000) for married filing jointly or a qualifying surviving spouse;
$23,625 (up from $22,500) for head of household; and
$15,750 (up from $15,000) for single or married filing separately.
An increase in the limitation on the itemized deduction for state and local taxes paid;
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Individuals who itemize their deductions can claim up to $40,000 ($20,000 if married filing separately) for state and local taxes paid.
Changes to the child tax credit.
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The maximum child tax credit has increased to $2,200 (up from $2,000) per eligible child.
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(Be sure to check the income phaseout, exceptions and eligibility for each of these new tax changes")
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Don't get caught off guard
If you're age 73 or older, make sure you've taken your required minimum distribution (RMD) from your retirement accounts before the end of the year or else you face a 25% penalty on any undistributed funds (unless it's your first RMD, in which case you can wait until April 1, 2024).