Tax Season of 2024: A Detailed Look at New Policies and Reporting Requirements
With the tax season of 2024 already coming closer, individuals are indirectly familiarizing themselves with a “new normal” and beginning to prepare for phasing out pandemic-era provisions. It is essential to consider the changes throughout this transition, especially those affecting the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC).
In the 2023 tax year, CTC was considered ‘flat’ at $2,000 for each eligible child or dependent. However, the CTC is also partially refundable when it’s greater than your liability and does not give you full credit because of your refund.
On a similar note, ODC aims to alleviate the financial burden that taxpayers who claim non-qualifying CTC older dependents face. This credit, however small, ranging to a maximum value of $500, is an insignificant amount in terms of tax credits.
Another significant provision for low to moderate-income families is the EITC. It has remained moderate, increasing due to inflation adjustments up to $7,430 for families with three or more children. This marginal increase may offer some long-awaited relief to eligible families.
Navigating Student Loans
Student loan payments resumed in the fall of 2023, which will have significant tax ramifications. According to Kathy Pickering, Chief Tax Officer at H&R Block, taxpayers may be able to write off up to $2,500 in student loan interest on each tax return each year. For those who were granted student loan forgiveness in 2023, tax liabilities could be a drawback to this benefit.
Through 2025, the American Rescue Plan will offer a temporary federal tax exemption on student loan debt forgiveness. Nevertheless, it’s crucial to remember that state taxes are not automatically excluded from this exemption. State taxes on forgiven debt may still be due by borrowers in states that have not ratified this federal law.
Cryptocurrencies, NFTs, and Payment Apps
During tax season 2024, users of payment applications and those interacting with digital assets like NFTs and cryptocurrencies may encounter additional challenges.
A primary concern arising from third-party payment networks was the requirement to submit Form 1099-K. This raised the maximum amount that could be spent above $600 on goods and services. Consequently, the IRS has chosen to lower this cap.
As digital assets are included in the list of tax returns, responses about cryptocurrency and NFT transactions are necessary. However, taxpayers can maximize their refund and decrease their taxable income by deducting losses on digital assets.
Home Office Deductions
The shift to remote work during the pandemic led to many people working from home. Yet, the home office deduction cannot be used by everyone and might serve as considerable savings for some people. This deduction is mostly exclusive to self-employed people.
In addition, it would be required that the home office should have been exclusively used for business purposes. Rooms used for dual purposes, like a dining room that is also an office, are not allowed this deduction.
2024 Key Dates and Exceptions
In 2024, the official opening of tax season was on January 29. Nevertheless, there are some exceptions to this sequence.
Taxpayers living in Maine and Massachusetts are given a later deadline of April 17 because they celebrate Patriots’ Day as well as Emancipation Day.
Further, the individuals living in areas declared as disaster relief sites by the Federal Emergency Management Agency may also be considered for extension.
For instance, citizens of Connecticut affected by storms in January have an extension until June 17 to file. These exceptions emphasize the need to understand local and contextual variations in tax deadlines.
