Spring 2024 tax updates

Tax Season 2024: The Final Numbers

As you know another tax season officially wrapped up on April 15, so let’s look at some of this year’s statistics. This year more taxpayers wanted to file by the deadline instead of putting their return on extension. In the last week, the number of individual returns received increased by 16.34% and the total returns received by April 19th increased by 1.5% in comparison to last year. One of the main differences between the 2023 and 2024 seasons is web usage and the frequency with which the IRS website was used. This rose 17.1% from last year. Direct deposit, as well as direct refunds and e-filed returns, stayed relatively similar between last year and this year. In conclusion, while most outside factors stayed relatively similar, more individuals were able to get their returns filed online and timely without issues.

Tax Planning for the TCJA’s Sunset

The Tax Cuts and Jobs Act, also known as the TCJA, was put into effect in 2017, but some of the provisions are currently scheduled to expire after 2025. Below are important changes to remember to properly maximize tax savings in the future.

• Tax rates were lowered by the TCJA, with the highest rate being lowered to 37%. On January 1, 2026, this rate reverts to 39.6%.
• The standard deduction will be cut in half (adjusted for inflation) compared to what it is now in 2026. Many taxpayers have not itemized in the last few years, but this is something to consider doing in the future.
• Owners of passthrough businesses (partnerships and S corporations) currently claim 20% of the QBI (qualifies business income) deduction. Starting in 2026, this deduction will no longer be allowed.
• From 2023 to 2026, bonus depreciation will no longer be 100%. The percentage scales will continue to decrease until they expire in 2026.
• For estate and gift taxation, the exclusion, which is currently $12.92, will be nearly half in 2025.

Check out this article for more information on tax provisions that will sunset in 2025.

Tax Bill Round-Up: April 2024

No major tax bills were passed into law this year, but several bipartisan measures were introduced. Below is a list of a few important ones to note:

• Nonprofit status- This would prohibit terrorist-supporting organizations from claiming tax-exempt status by amending Code Sec. 501(p)
• Clean energy credits - Further limit the foreign entities from which clean vehicle components may be sourced for tax credit eligibility. Also, extends clean vehicle tax credits to US possessions by adding Puerto Rican public entities, nonprofits, and electric cooperatives to the list of entities eligible for certain clean energy credits. Finally, legislation that would provide an energy tax credit for electrochromic glass.
• Digital assets - Bipartisan legislation would add a new code section to provide digital asset rewards collected at the point of sale instead of acquisition. This would avoid having taxpayers pay taxes before gains are realized.

Future changes are also pending.

IRS Gives First Annual Update on Inflation Reduction Act Spending

On May 2, the IRS released a one-year progress report on the Inflation Reduction Act. The IRS lists pinpointed the below wins:

• Hiring thousands of new customer support representatives, causes the average wait time to speak with an agent on the phone to drop from 28 minutes to 3 minutes.
• Expanding online features for tax professionals and various other individuals filing their returns
• Redesigning 31 notices
• Launching a pilot program for Direct File, which is a cost-free e-file alternative.
• Enabling digital correspondence and notice responses, to reduce the amount of returns that are paper filed.