With 2023 coming to a close, let’s take a look at what we already know will be changing in 2024 when it comes to taxes—and how they will affect our wallets and businesses. While sweeping tax reforms are unlikely as divided government continues in Washington, the IRS has finalized several smaller changes to retirement accounts, deductions, credits, and more that could impact your tax situation next year. Here are a few that we know you’ll be interested in learning about.
IRAs and Retirement Plans
In 2024, the amounts you can contribute to your retirement accounts like 401(k)s, 403(b)s, 457s, and IRAs are increasing. The IRS is also making more people eligible for the saver’s credit. These changes give you more tax-advantaged ways to save for retirement next year.
For example, if you are over 50 years old, you will be able to put away up to $30,500 total in your 401(k) in 2024. The income limits on contributing to Roth IRAs are also going up, so there is potential for more people to qualify and enjoy tax-free retirement savings growth.
If you claim the research and development (R&D) tax credit, you now have more time to back up your figures if the IRS requests more information. For example, if you are a small tech startup that qualifies for the R&D credit but did not fully document the wages, supplies, and calculations on your initial claim, the IRS will give you 45 extra days to flesh out the details instead of denying the credit outright. This more lenient grace period for fixing deficient but legitimate R&D credit claims runs through January 2025.
Just remember that the IRS expects you to eventually provide evidence like names of research staff, expenses incurred, and descriptions of experiments. While bonus leeway helps, you cannot claim credits long-term without the data to support the research activities generating them. Proactively document relevant projects in case auditors come reviewing.
The IRS has made permanent its temporary allowance for electronic signatures on certain tax forms that still must be physically mailed in. For instance, many tax-exempt organizations are required to file informational returns on Form 990 each year. In the past, a handwritten pen signature was required before sending the document to the IRS. Now you can sign Form 990 with an electronic signature that locks the document before printing and mailing it out.
This electronic option will be ongoing for the 41 eligible paper forms. So if you dislike signing forms by hand or want to enable remote sign-offs, you can now digitally sign and route most tax documents for submission via postal mail. Just double check what signature types the IRS permits for each specific mandatory mailed filing. The flexibility definitely boosts efficiency, but there are still particulars on authorized methods.
Electronic Vehicle (EV) Tax Credit
In 2023, you can take up to a $7,500 tax credit on the purchase of a qualifying electronic vehicle. However, in 2024, you can actually transfer that credit to the dealer at the time of purchase, lowering the amount you actually pay for the car for immediate benefit instead of waiting to claim the credit at tax time. So if you’ve been wanting that electronic vehicle, 2024 may be the year for you!
Tax laws are always changing. While major overhauls are unlikely in the face of split government, there are still incremental changes each year from the IRS and piecemeal actions by Congress that alter provisions, limits, forms, and rules that shape your filings.
The most important thing you can do for yourself and for your business is to plan vs. react. By staying informed and partnering with a proactive CPA advisor, you’ll be positioned to take advantage of provisions in the tax code that work in your favor, and you’ll be strategically equipped to manage your tax liability in alignment with your personal and business financial goals.