United States Tax Change Highlights for 2024
Reporting digital assets received as ordinary income, no longer able to buy savings bonds from TreasuryDirect with refunds, new 1040 area for nonresident or dual-status spouses electing to file as residents, IRS Direct File program a good option for some taxpayers with simple returns, updated Form 1099-K reporting requirements for 2024.
Who Must File
Generally, the amount of income you can receive before you must file a return has increased.
Due Date of Return
This year Form 1040 and 1040-SR are due April 15, 2025.
ACTC Amount Increased
The maximum Additional Child Tax Credit (ACTC) amount has increased to $1,700 for each qualifying child.
Delayed Refund if Claiming the ACTC
The IRS cannot issue refunds before mid-February 2025 for returns that properly claim the Additional Child Tax Credit, or ACTC. This time frame applies to the entire refund, not just the portion associated with the ACTC.
Standard Deduction Amount Increased
The standard deduction amounts for 2024 have increased for all filers. The new amounts are:
- Single or Married filing separately – $14,600;
- Married filing jointly or Qualifying surviving spouse – $29,200; and
- Head of household – $21,900.
Digital Assets Received As Ordinary Income
If you received digital assets as ordinary income, and that income is not reported elsewhere on your return, you should now enter those amounts on Line 8v of Schedule 1 (Form 1040).
Reporting Excessive Payments, Increase in Tax, and Recapture Amounts Related to Certain Investment Credits
If you reported an excessive payment, an increase in tax, and/or a recapture amount related to certain credits on Form 4255, Certain Credit Recapture, Excessive Payments, and Penalties, you will also need to report those amounts on Schedule 2 (Form 1040). See the instructions for Form 4255 and Schedule 2, Lines 1d, 1e, 1f, 1y, 17a, 17z, and 19.
Repayment Amount from Form 8936
If you have a repayment of the credit for new or previously owned clean vehicles reported on Form 8936 and Schedule A (Form 8936), those amounts will now be reported on Lines 1b and 1c of Schedule 2 (Form 1040).
Purchase of Savings Bonds Discontinued
The program allowing for your refund to be deposited into your TreasuryDirect account to buy savings bonds, as well as the ability to buy paper bonds with your refund, has been discontinued. Form 8888 is now only used to split your direct deposit refund between two or more accounts or to split your refund between a direct deposit and a paper check.
U.S. Tax Allocable to the U.S. Virgin Islands now Reported on Schedule 3
If you use Form 8689, Allocation of Individual Income Tax to the U.S. Virgin Islands, to figure your amount of U.S. tax allocable to the U.S. Virgin Islands, you will now report this amount on Line 13z of Schedule 3 (Form 1040).
Choosing to Treat Nonresident Alien or Dual-Status Alien Spouse as U.S. Resident
If you and your spouse choose to treat a nonresident alien or dual-status alien spouse as a U.S. resident for 2024, or if a prior year's choice to treat a nonresident alien spouse as a U.S. resident remains in effect for 2024, there is a new box to check in the Filing Status section of the Form 1040 or 1040-SR. Enter the name of the nonresident alien or dual-status alien spouse where indicated.
Reporting Transfer of a Credit for a New or Previously Owned Clean Vehicle Credit to a Dealer
If you purchased a new or used clean vehicle from a registered dealer and reduced the amount you paid at the time of sale by transferring the credit to the dealer, you must file a tax return and attach Form 8936 and Schedule A (Form 8936) to report the transfer of the credit and reconcile your eligibility on your return.
Relief Payments made to Individuals Affected by the East Palestine Train Derailment
If you received relief payments from a government agency, Norfolk Southern Railway, or its subsidiary, insurer, agent, or a related person due to being affected by the February 3, 2023, East Palestine, Ohio, train derailment, these payments may be nontaxable. See Pub. 547 for more information.
Qualified Wildfire Relief Payments
Qualified wildfire relief payments may be nontaxable. See Pub. 547 for more information.
Surviving Spouse Election to be Treated as Employee
Beginning in 2024, a surviving spouse who is the designated beneficiary of an employee covered by a qualified retirement plan (or other plan to which the required minimum distribution rules apply) or who is the designated beneficiary of an IRA owner, may elect to be treated as the employee for purposes of the required minimum distribution rules. See Pub. 575 and Pub. 590-B.
Wage Limitation for Pre-tax Catch-up Contributions
If you are an eligible participant in an applicable employer plan, you may make pre-tax catch-up contributions only if your wages from the employer sponsoring the plan did not exceed $145,000.
IRA Contribution Limit Increased
Beginning in 2024, the IRA contribution limit is increased to $7,000 ($8,000 for individuals age 50 or older) from $6,500 ($7,500 for individuals age 50 or older).
IRA Distributions to Victims of Domestic Abuse
Beginning with distributions made after December 31, 2023, a distribution to a domestic abuse victim is not subject to the 10% additional tax on early distributions if the distribution meets certain requirements. See Pub. 590-B for more information.
IRA Distributions for Emergency Personal Expenses
Beginning with distributions made after December 31, 2023, the exception to the 10% additional tax for early distributions is expanded to include distributions for certain emergency personal expenses. See Pub. 590-B for more information.
Deferred Compensation Contribution Limit Increased
If you participate in a 401(k) plan, 403(b) plan, or the federal government's Thrift Savings Plan, the total annual amount you can contribute is increased to $23,000 ($30,500 if age 50 or older) for 2024. This also applies to most section 457 plans.
Last Year to File Form 5405
The 15-year repayment period for the first-time homebuyer credit for homes purchased in 2008 began with your 2010 tax return and ends with your 2024 tax return. 2024 is the last year to file Form 5405.
Nontaxable Medicaid Waiver Payments
If you received nontaxable Medicaid waiver payments, those amounts should now be reported to you on Form(s) W-2 in box 12, code II.
Direct File
The IRS tested a Direct File program last year that allowed some taxpayers to prepare and efile their 2023 federal returns for free. It's now a permanent option available at IRS.gov/DirectFile. This filing option is for taxpayers in participating states who have relatively simple tax returns, report only certain types of income, and claim limited credits and deductions. Direct File doesn't prepare state returns, but it will guide you to a free state-supported preparation and filing tool after you finish your federal return.
Health Flexible Spending Arrangements (Health FSAs) under Cafeteria Plans
For tax years beginning in 2024, the dollar limitation under section 1251(i) on voluntary employee salary reductions for contributions to health FSAs is $3,200.
Standard Mileage Rate
The 2024 rate for business use of a vehicle is 67 cents a mile. The 2024 rate for use of your vehicle to do volunteer work for certain charitable organizations is 14 cents a mile. The 2024 rate for operating expenses for a car when you use it for medical reasons is 21 cents a mile.
Modified Adjusted Gross Income (AGI) Limit for Traditional IRA Contributions
For 2024, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is:
- More than $123,000 but less than $143,000 for a married couple filing a joint return or a qualifying surviving spouse,
- More than $77,000 but less than $87,000 for a single individual or head of household, or
- Less than $10,000 for a married individual filing a separate return.
If you either live with your spouse or file a joint return, and your spouse is covered by a retirement plan at work but you aren't, your deduction is phased out if your modified AGI is more than $230,000 but less than $240,000. If your modified AGI is $240,000 or more, you can't take a deduction for contributions to a traditional IRA. See How Much Can You Deduct in Chapter 9 of Publication 17.
Modified AGI Limit for Roth IRA Contributions
For 2024, your Roth IRA contribution limit is reduced (phased out) in the following situations.
- Your filing status is married filing jointly or qualifying surviving spouse and your modified AGI is at least $230,000. You can't make a Roth IRA contribution if your modified AGI is $240,000 or more.
- Your filing status is single, head of household, or married filing separately and you didn't live with your spouse at any time in 2024 and your modified AGI is at least $146,000. You can't make a Roth IRA contribution if your modified AGI is $161,000 or more.
- Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than zero. You can't make a Roth IRA contribution if your modified AGI is $10,000 or more. See Can You Contribute to a Roth IRA in Chapter 9 of Publication 17.
2025 Modified AGI Limits for IRA Contributions
You can find information about the 2025 contribution and modified AGI limits in Pub. 590-A.
Tax Law Changes for 2025
When you figure how much income tax you want withheld from your pay, and when you figure your estimated tax, consider tax law changes effective in 2025. For more information, see Pub. 505.
Alternative Minimum Tax (AMT) Exemption Amount Increased
The AMT exemption amount is increased to $85,700 ($133,300 if married filing jointly or qualifying surviving spouse; $66,650 if married filing separately). The income levels at which the AMT exemption begins to phase out have increased to $609,350 ($1,218,700 if married filing jointly or qualifying surviving spouse).
Updated Reporting for Form 1099-K
For 2024, payment card companies, payment apps, and online marketplaces will be required to send you Form 1099-K when the amount of your business transactions during the year is more than $5,000. In calendar year 2025, the threshold will lower to more than $2,500; and for 2026 and later years, the threshold will be more than $600. If you receive a Form 1099-K that shows payments that were included in error or for personal items sold at a loss, you now enter these amounts on Schedule 1 of Form 1040. See Chapter 8 of Publication 17 for more information.