Dear Taxpayers:
As always committed to keep you up to date with helpful information, The US 2025 tax season is approaching. IRS will begin accepting 2024 income tax filing on January 27, 2025. I’d like to share with you few highlights of the most significant tax law changes and latest updates with key rates, thresholds and limitations for TY 2024 you need to be aware of.
- Due Date – File your 2024 income tax returns by April 15, 2025 to avoid interest and penalty on taxes not paid for late filing.
- Name Change- To avoid delay of processing your tax return if you changed your name due to marriage or divorce during 2024, report the change to the Social Security Administration (SSA) before filing your return.
- Tax Rates- the 2024 lowest rate is 10% for single with income of $11,600 or less & for MFJ with income of $23,200 or less; the highest rate 37% for for single with income greater than $609,350and for MFJ with income greater than $731,200.
- Traditional & Roth IRA – $7,000 limit. Additional $1,000 for 50 years +age for catch-up. Taxpayer may contribute & apply it to tax year 2024 during this tax season before filing. Contact your personal banker to guide you through the process, then supply your tax professional with the information when ready to file your tax returns.
- Standard Deduction – $14,600 for single or married filing separately, $29,200 for married filing jointly or qualifying surviving spouse, and $21,900 for head of household. If blind or over age 65, deduct additional $1,950 for single/HHH and $1,550 for MFJ/MFS/QSS. If the standard deduction is higher than the itemized, use the standard deduction.
- Student Loan Interest – $2,500 maximum interest deductions. This amount phaseout for married filing joint returns if modified adjusted gross income $145,000 -$175,000 and for single/HHH MAGI $70,000 – $85,000.
- 401(K) Contributions – $23,000 deferral, additional $7,500 for catchup deferral contributions for age 50+. This is a good opportunity to shelter good portion of your earnings from being taxable.
- Educator Expense – Educators may deduct up to $300 of qualified expense paid for books or school supplies purchased during 2024.
- Earned Income Credit – To claim the earned income credit without qualifying child, you must be at least age 25 but under age 65. If married filing joint return, either spouse can meet the age requirement, as long as one of the spouses does. The maximum credit $632 for taxpayers without dependents, $4,213 for taxpayers with 1 dependent, $6,960 for taxpayers with 2 dependents, $7,830 for taxpayers with 3 or more dependents.
- Child Tax Credit – The initial credit amount of child tax credit for child under age 17 is $2,000. The maximum refundable is $1,700 for each qualifying child. $500 nonrefundable credit for other dependent.
- Child and Dependent Care expenses credit – The credit for child and dependents care expense is nonrefundable. The credit is up to $3,000 for one qualifying person and up to $6,000 for two or more qualifying persons. The maximum credit is amount is 35% of employment-related expenses.
- Education Credit – American Opportunity credit up to $2,500 available for four years for eligible student. Lifetime Learning up to $2,000 per return available for unlimited number of years.
- Foreign-Source Income- in addition to reporting foreign earned income, you must also report unearned income. This may include interest, dividends, and pensions from sources outside the United States unless exempt by law or tax treaty. If you were a beneficiary of retirement plan, you may have to report the undistributed income on the plan. Report a distribution received from foreign account or trust and report your foreign financial assets, if any.
- Digital Assets Virtual Currency- The only evidence of its existence is the digital records or ledger indicating balances held and transactions that have occurred. The IRS uses the term “virtual currency” to describe the various type of convertible virtual currency that are used as a medium of exchange, such as a digital currency and cryptocurrency. Regardless of the label applied, if a particular asset has the characteristics of virtual currency, it will be treated as virtual currency for Federal Income Tax purposes. If taxpayer disposed any virtual currency that was held as capital asset, Form 8949 must be used to figure the capital gain or loss and report it on Schedule D (Form 1040). If virtual currency received as compensation for services or disposed any virtual currency that was held for sale in a trade or business, such transaction must be reported as income same as reporting other income. Keep accurate records to avoid being challenged by the IRS.
- Large Purchase Credit- If you purchase an electric vehicle during 2024, the credit up to $7,500.. Provide your tax professional with the purchase documents to calculate the available credit. The credit is not available if you use the credit as a rebate at the time of purchase or as a discount on the price of your electric vehicle.
- Self- Employment Tax- For earnings more than $400 during 2024, SET is 15.3% (12.4$ for SS plus 2.9% for Medicare). 0.9% Medicare Surtax on self-employment income in excess of $200,000 (single), $250,000 (MFJ), or $125,000 (MFS).
Identity Theft continues to be a priority. Your tax professional should have implemented security measures in the use of tax software and a safe method in the exchange of documents. I am aware and fully prepared for this tax filing season. My investment in our Client Portal Service is ready and available to give each client the ability to securely log in to safely share and exchange documents.