The past few years have been a rollercoaster for the IRS and taxpayers alike. In 2020, Congress passed two rounds of stimulus checks, and Tax Day was postponed until July; in 2021, there was one final round of stimulus checks, Tax Day was postponed until May, and the expanded child tax credit took effect. The following years saw a slew of COVID-era tax provisions expire one by one…
…and now we’re here.
“This tax season, the good news is there aren’t a lot of changes, so people can actually have kind of a normal filing experience,” says Kathy Pickering, chief tax officer for H&R Block.
Congress hasn’t passed much consequential, or at least broadly applicable, tax legislation since the Tax Cuts and Jobs Act of 2017. But just because there aren't significant shifts in IRS policy this year doesn’t mean you can fill out your 1040 on autopilot. Here's what you need to know before you file your taxes:
The standard deduction and tax brackets have changed
Every fall, the IRS adjusts its tax brackets and standard deduction to account for inflation. Because inflation has been running high lately, these tweaks have been significant. For the 2023 tax year, the IRS boosted the standard deduction by about 7%, raising it to $13,850 — a $900 increase from 2022.
While the tax rates themselves didn’t shift, the actual income thresholds that determine them did. For instance, for the 2023 tax year (returns filed in 2024), the lowest income tax rate (10%) applies to the first $11,000 a single-filing individual earns. For 2022, the cutoff was $10,275.
This means more of your money is shielded from high tax rates.
“If nothing else changed about their situation, [taxpayers] should be seeing a little bit bigger refund, because not too many people were getting 7% salary increases,” Pickering says.
The IRS Free File income limit is higher
The IRS made more Americans eligible to file their taxes for free through its public-private partnership this year. Taxpayers with an adjusted gross income (AGI) of $79,000 or less in 2023 can access guided tax prep through IRS Free File. That's a whopping $6,000 higher than last year's income cap of $73,000.
IRS Free File providers include 1040.com, 1040NOW, ezTaxReturn.com, FreeTaxUSA, FileYourTaxes, OnLine Taxes, TaxAct and TaxSlayer. IRS Free File is now open for the 2024 tax filing season.
If your AGI is higher than $79,000, you have the option to use the IRS's Free File Fillable Forms tool to complete your tax return. But be aware this doesn't come with the level of hand-holding that IRS Free File does — you'll need a bit of tax knowledge if you take this route.
There’s still time to contribute to your HSA and retirement accounts
The deadline for IRA contributions for the prior year is Tax Day, meaning there are a few more weeks to make a deposit into an individual retirement account. The IRA limit for 2023 is $6,500 per taxpayer (or $7,500 for those older than 50).
You can also contribute to your Health Savings Account, or HSA, until April 15. The limit for 2023 is $3,850 for individuals and $7,750 for families (people older than 55 and older can contribute an additional $1,000).
This matters because IRA and HSA contributions can be deductible for certain taxpayers, making them a last-minute life hack of sorts.
“If you're filling out your tax return, and you end up being in a higher bracket than anticipated or your [adjusted gross income] is causing you to miss out on some tax benefits, potentially contributing to an HSA is a great way to reduce your tax liability by a few thousand dollars,” says Isaac Bradley, director of financial planning at Homrich Berg, an Atlanta-based wealth management firm.
IRS customer service has (allegedly) improved
The IRS got a major infusion of funding as part of the Inflation Reduction Act. Much of that money has gone towards updating its systems, tracking down tax cheats and — crucially — improving customer service.
Not only have roughly 250 Taxpayer Assistance Centers extended their hours, but also the IRS has upgraded its Where's My Refund? tool to give more detailed information about the status of people's tax refunds. The agency is working on beefing up its phone support, too, saying in a news release that "increased help [is] available on the toll-free line" in addition to an "expanded customer call-back feature designed to significantly reduce wait times."
You can get credit for your EV and clean-energy upgrades
The Inflation Reduction Act of 2022 changed the rules around electric vehicle credits. You can now get a nonrefundable EV tax credit of up to $7,500 if you purchase a qualifying electric car and make under $150,000 ($300,000 if you're married filing jointly). Plus, the credit can be applied upfront at the dealership, essentially giving you a major discount.
Pickering says there’s also a lot of opportunity for home improvement projects that fall under the residential clean energy credit, which kicks back 30% of certain environmentally friendly expenses up to $3,200. These include solar panels, solar heaters, wind turbines, fuel cells and more, so the guidance here is that homeowners should plan out upgrades in advance.
For instance, “you may want to plan to replace two windows this year and two windows the next year so that you can fully take advantage of the credit as opposed to doing all of it all at once,” she adds.
Procrastinating because of the child tax credit vote is a bad idea
The House passed a new version of the expanded child tax credit on Jan. 31, and the proposal is now lingering in the Senate. If the bill, called the Tax Relief for American Families and Workers Act of 2024, becomes law, it would make the credit accessible to more families by increasing the amount that is refundable and adjusting it regularly for inflation.
Nobody knows, though, when this might happen. Proponents have said they want the new expanded child tax credit in effect for the 2024 tax filing season, which (clearly) has already begun. And though some parents may worry about the agency’s ability to quickly handle adding the credit to a bunch of already filed tax returns, the IRS swears everything is under control.
“Taxpayers should file when they’re ready to file,” IRS Commissioner Danny Werfel told reporters recently. “If there is a change to the law that means, for example, they would get an additional or an increased credit, we will handle that at the IRS.”
Pickering agreed, pointing out that the government handles tax returns in the order they got them, and by waiting you’re just “putting yourself that much farther behind in the queue.”
So get moving — and, as always, remember the fastest way to get your tax refund is to file digitally and choose direct deposit as your delivery method.
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