As we step into 2024, it’s time to get familiar with some new tax rules. This year, there are a few important changes you need to know about. From getting deductions for choosing eco-friendly housing and cars to seeing higher taxes if you earn more, it’s crucial to stay updated. In this guide, we’ll break down these changes and highlight key dates, so you can navigate the tax season with confidence.
Some key tax changes for 2024
Get ready for some shifts in your financial game plan! From a slight tax increase for higher wage earners to a bigger standard deduction, let’s dive into the details to ensure you’re well-prepared for the year ahead.
1. Tax breaks for eco-friendly lifestyle changes
If you bought an eco-friendly car or made your home more energy-efficient in 2023, you could get some money back from the government. For instance, if you bought an eco-friendly car, you could get up to $7,500 off your taxes. Also, if you made eco-friendly improvements to your home, you could get even more money back. These tax breaks can be a bit tricky, so it’s important to get all your paperwork organized before you see a tax preparer.
2. Increased taxes for higher earners in California
California operates a short-term disability program that provides financial assistance to individuals unable to work, due to non-work-related illness, injury, or pregnancy. Funded by a 1.1% tax on wages, the program historically applied this tax solely to wages below approximately $153,000 as of 2023.
However, effective January 1st, a newly enacted law, passed in 2022 but implemented this year, abolishes the wage cap. With the wage cap removed, Californians earning over $153,000 annually are now subject to a 1.1% tax on their entire wages.
3. Adjusted, expanded tax brackets are being implemented
Experts noted a significant adjustment in the federal income tax brackets when comparing the years 2022 and 2023—Despite unchanged rates, the federal income tax brackets experienced have expanded by roughly 7%, allowing for more taxable income within each tier without changing the rates.
4. Delays in reporting rules for app payments, like PayPal or Venmo
The IRS has postponed changes to the reporting rules for business payments made through apps, like PayPal or Venmo. Before this change, if a business received even just $600 through these apps, the income had to be reported using Form 1099-K to the IRS.
However, for 2023, the IRS decided to stick with the previous rule: businesses will be expected to report, if they had more than 200 transactions totaling over $20,000. Still, it’s important to remember that even if the reporting rules change, any income your business earns is still taxable. So, even if the app doesn’t send you a Form 1099-K, you’re still responsible for reporting your income to the IRS.
5. Increased standard deduction, due to inflation
Inflation led to an increase in the standard deduction for taxes in 2023, allowing one to deduct a larger amount from one’s income before tax is calculated. However, this might make it less beneficial for some people to itemize certain deductions, such as charity or medical expenses. This change, established by the Tax Cuts and Jobs Act of 2017, is set to expire in 2026, alongside a return to previous tax rates.
Important tax deadlines
- Tax Deadline 2024:
Monday, April 15. Historically, Tax Day has fallen on or around April 15 since 1955. To avoid interest and penalties, it’s crucial to file your tax return and settle any outstanding balance by the Tax Day deadline. - Tax Extension Deadline 2024:
October 15. This is granted to those who request an extension of time to file their tax return, allowing for an additional six months to file your return. - Refund Timeline 2024:
Within 21 days of filing. Typically, if you filed your return electronically and opted for direct deposit, you can expect to receive your refund within three weeks (21 days) of filing. For paper filings, expect your refund within or six to eight weeks.
File your taxes online for free
Taxpayers earning $79,000 or less in 2023 have access to IRS Free File guided tax software until the tax deadline of October 15. IRS Free Fillable forms, included in this program, are free for taxpayers of all income levels, offering electronic forms for self-filing and e-filing. Check out all the ways in which you can comply with the tax deadline for free:
- IRS Direct File. This is available to eligible taxpayers in 12 pilot states, including California.
- Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE). These programs provide free tax return preparation to eligible individuals in the community through certified IRS volunteers and community partnerships.
- MilTax. This Department of Defense program offers free tax return preparation and electronic filing software for federal income tax returns, and up to three state income tax returns to military members and some veterans, with no income limit.
Free in-person tax filing assistance
In case you need an extra hand to process your tax obligations, there are several options available for you to meet the April 15 tax deadline.
- VITA/TCE: Free tax assistance provided by IRS programs for individuals earning $64,000 or less, persons with disabilities, and limited English speakers needing help with tax preparation.
- AARP Foundation: Free tax help available for all, especially those aged 50 and older, or with low to moderate income, focusing on pension and retirement-related queries. Locate AARP Tax-Aide online or call 888-227-7669.
- Local VITA Programs: Free in-person tax preparation services offered by universities such as UCLA, CSUN, CSULA, and CSULB. Visit their websites for details and appointments.
In-full tax payment options
The IRS provides a range of payment options for taxpayers, particularly as the tax deadline approaches.
- Direct Pay: Make payments, without a fee, directly from your checking or savings account.
- Card Payments: Pay with a debit card, credit card, or digital wallet. Processing fees apply, but the IRS doesn’t charge any additional fees.
- EFTPS: Use this free service to securely pay individual and business taxes over the phone or online. To enroll or learn more, call 800-555-4477 or visit eftps.gov.
- Electronic Funds Withdrawal: File and pay electronically from your bank account when using tax preparation software or a tax professional. This option is free and available only for electronic tax filings.
- Cash Payments: Pay with cash through approved retail partners and other methods. Start early, as this option involves a four-step process. Visit IRS.gov/paywithcash for details and FAQs.
Remember, consulting a financial expert can provide personalized advice during this season. Good luck, Los Angeles!