2024 Taxes: 8 Things to Know Now

With the year rapidly coming to a close, it might pay to prepare in advance for Tax Day.

"It's a great time to reassess your tax planning for 2024. An important part of this process is to know the likely tax bracket you'll be in, the limits that could impact you, and the potential deductions available," said Hayden Adams, CPA, CFP^®, and director of tax and wealth management at the Schwab Center for Financial Research.

Here are eight things to keep in mind as you prepare to file your 2024 taxes.

There are still seven tax rates, but the income ranges (tax brackets) for each rate have shifted slightly to account for inflation. For 2024, the following rates and income ranges apply:

After an inflation adjustment, the 2024 standard deduction increases to $14,600 for single filers and married couples filing separately and to $21,900 for single heads of household, who are generally unmarried with one or more dependents. For married couples filing jointly, the standard deduction rises to $29,200.

For most filers, taking the higher standard deduction is more practical and saves the hassle of keeping track of receipts. But if you have enough tax-deductible expenses, you might benefit from itemizing.

The following rules for itemized deductions haven't changed much for 2024, but they're still worth pointing out.

• State and local taxes: The deduction for state and local income taxes, property taxes, and real estate taxes is capped at $10,000.
• Mortgage interest deduction: The mortgage interest deduction is limited to $750,000 of indebtedness. But people who had $1,000,000 of home mortgage debt before December 16, 2017, will still be able to deduct the interest on that loan.
• Medical expenses: Only medical expenses that exceed 7.5% of adjusted gross income (AGI) can be deducted in 2024.
• Charitable donations: In 2024 the annual income tax deduction limits for gifts to public charities¹ are 30% of AGI for contributions of non-cash assets—if held for more than one year—and 60% of AGI for contributions of cash. If you give both can and non-cash assets, the overall limit is generally 50% of AGI.
• Miscellaneous deductions: No miscellaneous itemized deductions are allowed.

The traditional IRA and Roth contribution limits in 2024 increased slightly from 2023. Individuals can contribute up to $7,000 to an IRA, and those age 50 and older also qualify to make an additional $1,000 catch-up contribution. In addition, the 2024 contribution limits for tax-deferred 401(k)s and Roth 401(k)s have increased to $23,000. If you're age 50 or older, you qualify to make an additional $7,500 catch-up contribution for this tax year as well. 

If you're able to, consider maxing out your contributions to these accounts. Doing so can provide a boost to your retirement savings and potentially provide a tax deduction. 

For 2024, the maximum you can contribute to an HSA is $4,150 for an individual and $8,300 for a family. People 55 and older can contribute an extra $1,000 catch-up contribution.

To be eligible for an HSA, you must be enrolled in a high-deductible health plan (which usually has lower premiums as well). Learn more about the potential benefits of an HSA.

Tax credits, which reduce the tax you owe dollar for dollar, are normally better than deductions, which reduce how much of your income is subject to tax. In 2024, the Child Tax Credit is $2,000 per child age 17 or younger. The credit is also subject to a phase-out starting at $400,000 for joint filers and $200,000 for single filers. For other qualified dependents, you can claim a $500 credit.

Until the AMT exemption enacted by the Tax Cuts and Jobs Act expires in 2025, the AMT will mostly continue to affect households with incomes over $500,000. For 2024, the AMT exemptions are $85,700 for single filers and $133,300 for married taxpayers filing jointly. The phase-out thresholds are $1,218,700 for married taxpayers filing a joint return and $609,350 for all other taxpayers. (Once your income for the AMT hits the phase-out threshold, your AMT exemption begins to phase out at 25 cents for every dollar over the threshold.)  

The estate and gift tax exemption, which is indexed to inflation, rose to $13,610,000 for 2024. But the now-higher exemption is set to expire at the end of 2025, meaning it could be essentially cut in half at that time if Congress doesn't act.

The annual gift exclusion, which allows you to give money to your loved ones each year without incurring any tax liability or using up any of your lifetime estate and gift tax exemption, increases to $18,000 per recipient.

If you're age 73 or older, make sure you've taken your required minimum distribution (RMD) from your retirement accounts before the end of the year or else you face a 25% penalty on any undistributed funds (unless it's your first RMD, in which case you can wait until April 1, 2025).

If you haven't contributed to your retirement accounts already, now is the time. Review your earnings for the year and take advantage of any deductions that can lower your tax bill. Tax season will be here before you know it, and it's never too early to start preparing.