Strategic tax planning should occur all year long, but it heats up during the first few weeks of the year when the April 15 filing deadline starts to loom.
An expert in tax planning like Saddock Advisory can ensure that you successfully weather most of the changes for the 2024 and 2025 tax years. However, it’s helpful to brush up on the basics and stay informed about changes in the tax landscape.
Understanding Tax Law Changes for Tax Year 2024
Adjustments to Standard Deductions and Tax Brackets
Standard deductions have a noticeable increase in 2024 due to recent inflation adjustments, which affect virtually all taxpayers. The standard deductions for 2024 per the IRS are as follows:
- The standard deduction for married couples filing jointly for tax year 2024 rises to $29,200. This number is a marked increase from $1,500 in tax year 2023.
- The standard deduction for single taxpayers and married individuals filing separately rises to $14,600 for 2024, an increase of $750 from 2023.
- The standard deduction for heads of households rises to $21,900 for 2024. Again, a significant increase of $1,100 from the amount for 2023.
Note that the standard deductions are projected to increase again for 2025’s tax year.
Top Credits and Deductions for 2024
While there are countless credits and deductions to analyze, be sure to review and become familiar with the most common examples, as many become more advantageous to tax filers for 2024.
- IRA and 401(k) Deductions. Depending on a tax filer’s income and other factors, contributions to traditional IRAs and 401(k)s may be fully or partially deductible.
- Savers Tax Credit (STC). Tax filers who contributed to an IRA or 401(k) may be eligible for the STC credit alongside other relevant deductions. Depending on the adjusted gross income and filing status, this credit may be worth up to $1,000.
- Child Tax Credit (CTC). For qualified tax filers, the CTC provides up to $2,000 for each child or dependent under the age of 17.
- Earned Income Tax Credit (EITC). Workers with low or moderate income may be eligible for the refundable EITC. Expect to receive a minimum credit of $600, which may be higher if you have qualifying dependents.
- American Opportunity Tax Credit (AOTC). The AOTC provides up to $2,500 for qualified educational costs, such as tuition and textbooks, although a parent or student can only claim it once.
- Student Loan Interest Deduction. With this deduction, filers with student loans can claim any loan interest paid during the year, up to a maximum of $2,500.
- Residential Clean Energy Credit. This credit is appropriate for tax filers who have spent funds at home on solar, wind, fuel cell, geothermal, and other renewable technologies.
IRS Updates and Their Implications
According to a December press release, the IRS’s online services have continued to improve, with digital tools and options to help people prepare more efficiently for tax season.
These upgraded services include the following:
- Individuals can create or access an IRS Online Account at Online account for individuals. Through this portal, taxpayers can view key details from their most recent tax return, request an Identity Protection Pin, and receive and view over 200 IRS electronic notices.
- The IRS’s Get Ready page on IRS.gov offers practical tips and resources to help taxpayers prepare to file. This page highlights key updates and essential steps to make tax filing easier in 2025 and beyond.
- The IRS now has 30 forms available for mobile use, allowing taxpayers to fill out common non-tax forms on cell phones and tablet devices and then submit them to the IRS digitally. Per the IRS, taxpayers have submitted more than 72,000 mobile-friendly forms. This milestone was achieved since launching this digital asset at the end of 2023.
Additionally, on January 10th, the IRS announced tax relief for businesses and individuals in Southern California affected by straight-line winds and wildfires that began on January 7th. Impacted taxpayers now have until October 15, 2025, to file federal tax returns. This extension applies to both individual and business filings and payments.
Looking Ahead to Tax Year 2025
The IRS adjusts dozens of tax provisions yearly, and 2025 is no exception.
In late October 2024, the IRS announced details on adjustments and changes to more than 60 tax provisions that will impact taxpayers when they file their returns in 2026.
These changes include adjustments to standard deductions, marginal rates, and alternative minimum tax exemption amounts. They also include alterations in common credits and deductions like earned income tax credits, medical savings accounts, estate tax credits, and more.
Prepare for April 15 and get a jump start on 2025 taxes with Saddock Advisory.
Connect with us today to enhance your tax planning strategy in 2024, 2025, and beyond. With an expert like Saddock Advisory guiding the way, you can rest assured that you are prepared for the imminent tax season. Together, let’s make 2025 your most financially beneficial year yet.
