Here is an overview of the federal tax provisions that go into effect in 2023 and other tax updates for tax year 2024:

Provisions Effective in 2024 

Retirement Plan Provisions (Secure Act 2.0) 

IRA Contribution Limits: 

• For individuals age 50 or older: $8,000. 

• For individuals under age 50: $7,000. 

Retirement Plan Withdrawals for Domestic Abuse: 

• Individuals who have experienced domestic abuse may withdraw the lesser of $10,000 or 50% of their account balance without incurring the 10% early withdrawal penalty. 

• Withdrawn amounts can be repaid over three years. Any income tax paid on the repaid amount will be refunded. 

Retirement Plan Withdrawals for Emergency Expenses: 

• Qualifying emergency expenses are exempt from the 10% early withdrawal penalty. 

• Qualifying expenses must be unforeseen or relate to immediate personal or family financial needs. 

• One distribution of up to $1,000 is allowed per year. Taxpayers can opt to repay the distribution within three years. 

Bonus Depreciation 

• Eligible property placed in service during 2024 qualifies for 60% bonus depreciation. 

New Clean Vehicle Credit 

Updates to the electric vehicle (EV) tax credit for 2024 include: 

Full $7,500 Credit Requirements: 

• Battery Critical Minerals Requirement ($3,750): 
  • At least 50% of critical minerals in the battery must be extracted or processed in a U.S. free trade partner country or recycled in North America. 

• Battery Components Requirement ($3,750): 
  • At least 60% of the vehicle’s battery components must be manufactured or assembled in North America. 

Exclusions:

• Vehicles with battery components manufactured or assembled by a foreign entity of concern (e.g., China, Russia, North Korea) are ineligible. 

Using the Credit as a Down Payment: 

• Beginning in 2024, taxpayers can transfer the $7,500 credit to the dealer to use as a down payment when purchasing the vehicle. 

For additional details, refer to IRS Tax Tip 2023-123: Clean Vehicle Credits Can Help Car Buyers Pay Less at the Dealership. 

Reminders for the New Clean Vehicle Credit 

Other unchanged provisions include: 

1. Income Limits: 
   • Credit is available if the taxpayer’s modified adjusted gross income (AGI) does not exceed: 
     • $300,000 for Married Filing Jointly. 
     • $225,000 for Head of Household. 
     • $150,000 for all other filing statuses. 
2. Vehicle Price Limits: 
   • Credit is available for vehicles with a manufacturer’s suggested retail price (MSRP) of: 
     • $80,000 or less for vans, SUVs, or pickup trucks. 
     • $55,000 or less for all other vehicles. 
3. Other Requirements: 
   • Credit can be claimed for one vehicle per year. 
   • Qualifying vehicles must: 
     • Be purchased new and used primarily in the U.S. 
     • Not be purchased for resale. 
     • Include the Vehicle Identification Number (VIN) on the taxpayer’s federal income tax return. 
4. Fuel Cell Vehicles: 
   • The full $7,500 credit is available for eligible fuel cell vehicles meeting the requirements under IRC 30B(b)(3). These vehicles must convert chemical energy into electricity using hydrogen fuel. 
5. Eligibility Criteria: 
   • Vehicles must weigh less than 14,000 pounds. 
   • Final assembly must occur in North America. 
   • Vehicles must be either: 
     • Plug-in electric vehicles with a battery capacity of at least 7 kilowatt hours. 
     • Fuel cell vehicles.  

For more details, see the following IRS resources: 

• Credits for New Clean Vehicles Purchased in 2023 or After. 

• IRS Fact Sheet FS-2024-26 – Updates to FAQs on New, Previously Owned, and Qualified Commercial Clean Vehicle Credits. 

Tax Year 2024 Annual Changes and Reminders

Mileage Rates for 2024

• Business: 67 cents per mile 
• Medical: 21 cents per mile 
• Charitable purposes: 14 cents per mile 

Standard Deduction for 2024

• Single or Married Filing Separately: $14,600 
• Married Filing Jointly or Surviving Spouse: $29,200 
• Head of Household: $21,900 

Additional Standard Deduction for 65 and older/Blind

• $1,550 (per person, if 65 or older OR blind) 

• $1,950 (if unmarried, 65 or older AND blind) 

Maximum Earned Income Tax Credit

• Three or More Children: $7,830 
• Two Children: $6,960 
• One Child: $4,213 
• No Children: $632 

Refundable Portion of Child Tax Credit

• $1,700

Due Diligence Penalty

• $600 for errors related to the following: 
  • Earned Income Tax Credit (EITC) 
  • Child Tax Credit 
  • American Opportunity Credit 
  • Head of Household filing status 

2024 Federal Form Changes 

Form 4136: Fuel Tax Credit Worksheet 

• New Requirement: Taxpayers claiming the fuel tax credit must complete and attach a new worksheet (Worksheet Fuel Tax Credit – 1). 
• Purpose: Ensures taxpayers meet credit requirements and provides detailed business use of the fuel. 

Form 1040: Filing Status Update 

• A new line has been added for cases where a nonresident alien or dual-status spouse is treated as a U.S. resident for tax purposes. 

• Requirements: 
  • Check the box on the form. 
  • Enter the nonresident spouse’s name. 
  • Attach a statement signed by both spouses if it’s the first year of this election. 

• For more details, see: 
  • IRS Publication 519 (US Tax Guide for Aliens) – Starting on page 13. 
  • Nonresident Spouse Page on the IRS website. 

Form 5695: Residential Energy Credits 

• A checkbox has been added for taxpayers who jointly occupy a home (with someone other than a spouse) and jointly paid for qualifying property. 

• Special Rule: Both individuals can claim the credit proportionally. 

• For more information, refer to the Form 5695 instructions for line 7c. 

Form 1040, Schedule 1: Reporting 1099-K Amounts 

• A new line has been added to report amounts from Form(s) 1099-K that: 
  • Are from the sale of personal items sold at a loss. 
  • Were reported to the taxpayer in error. 

Reminders: 2024 Reporting Requirements

New Reporting Requirements for Third-Party Network Transactions 

Beginning in 2024, individuals who receive $5,000 or more in income from goods and services through third-party payment networks (e.g., Venmo, Cash App, PayPal, Zelle) will receive a Form 1099-K (Payment Card and Third-Party Network Transactions) in January 2025. 

Background: 

• This reporting change was originally slated to take effect in 2022 but was delayed by the IRS until 2024. 

Corporate Transparency Act: Beneficial Ownership Reporting 

Under the Corporate Transparency Act, reporting companies must file a Beneficial Ownership Information (BOI) report with FinCEN. 

Key Deadlines: 

• Existing Companies (as of January 1, 2024): Initial BOI report is due by January 1, 2025. 

• New Companies (formed on or after January 1, 2024): Must file their initial report within 30 days of creation or registration. 

Ongoing Reporting Requirements: 

• After the initial report, companies must file updates when changes occur. 

• Changes to the report must be filed within 30 days of becoming aware of the change or discovering an inaccuracy. 

For More Information: 

Visit the FinCEN Beneficial Ownership Information section on FinCEN’s website. 

CrossLink Professional Tax Software

CrossLink is the industry’s leading professional tax software solution for high-volume tax businesses. Built based on the needs of busy tax offices and mobile tax preparers that specialize in providing their taxpayer clients with fast and accurate tax returns, CrossLink has been a trusted software solution since 1989. CrossLink’s in-depth tax calculations, advanced technological features, and paperless solutions allow you to prepare the most complicated tax returns with confidence and ease while providing your customers an unparalleled experience.