The last few years have been a roller coaster for both the IRS and taxpayers. In 2020, Congress passed two rounds of stimulus checks and Tax Day was postponed until July; in 2021, there was one last round of stimulus checks, Tax Day was pushed back to May, and the expanded child tax credit went into effect. The ensuing years have seen a series of COVID-era tax provisions expire one after another…
…and now we are here.
“This tax season, the good news is that there’s not a lot of changes, so people can actually have a sort of normal filing experience,” says Kathy Pickering, tax manager at H&R Block.
Congress hasn’t passed very consequential, or at least broadly applicable, tax laws since the Tax Cuts and Jobs Act of 2017. But just because there are no significant changes in IRS policy this year doesn’t mean you can file your 1040 with the automatic pilot. Here’s what you need to know before filing your tax return:
Standard deductions and tax brackets have changed
Each fall, the IRS adjusts its tax brackets and the standard deduction to account for inflation. Since inflation has been high lately, these changes were significant. For the 2023 tax year, the IRS increased the standard deduction by about 7%, bringing it to $13,850, which is a $900 increase over 2022.
While the tax rates themselves have not changed, the effective income thresholds that determine them have. For example, for tax year 2023 (returns filed in 2024), the lowest tax rate (10%) applies to the first $11,000 earned by an individual on a single return. For 2022, the limit was $10,275.
This means more of your money is protected from high tax rates.
“If nothing else changed about their situation, [taxpayers] we should see a little bit more of a refund, because not many people got 7% pay raises,” Pickering says.
The IRS Free File income limit is higher
The IRS made more Americans eligible to file taxes for free this year through its public-private partnership. Taxpayers with an adjusted gross income (AGI) of $79,000 or less in 2023 can access guided tax preparation through IRS Free File. That’s a full $6,000 more than last year’s $73,000 income limit.
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 more than $79,000, you have the option of using the IRS Free File Forms tool to complete your tax return. But keep in mind that this doesn’t come with the level of manpower that IRS Free File does—you’ll need some tax knowledge if you go this route.
There’s still time to contribute to your HSA and retirement accounts
The deadline for IRA contributions for the previous year is Tax Day, which means you still have a few 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 age 50 and older).
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 55 and older can contribute an additional $1,000).
This is important because IRA and HSA contributions may be deductible for some taxpayers, making them something of a last-minute trick.
“If you are filing your tax return and you find yourself in a higher bracket than expected 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, a wealth management firm based in Atlanta firm.
IRS customer service has (supposedly) improved
The IRS got a major infusion of funding as part of the Inflation Reduction Act. Much of that money was used to upgrade its systems, ferret out tax evaders, and, most importantly, improve customer service.
Not only have approximately 250 taxpayer assistance centers extended their hours of operation, but the IRS has also updated its Where’s My Refund? service. tool to provide more detailed information on the status of people’s tax refunds. The agency is also working to strengthen its telephone support, saying in a press release that “help has increased [is] available on the toll-free line” as well as an “expanded customer callback functionality designed to significantly reduce wait times.”
You can get credit for your electric vehicles and clean energy upgrades
The Inflation Reduction Act of 2022 changed the rules on credits for electric vehicles. You can now get a nonrefundable electric vehicle tax credit of up to $7,500 if you purchase an eligible electric car and earn less than $150,000 ($300,000 if you’re married filing jointly). Additionally, the credit can be applied upfront at the dealership, essentially giving you a major discount.
Pickering says there are also many opportunities for home improvement projects that fall under the Residential Clean Energy Credit, which reimburses 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 for upgrades ahead of time.
For example, “you might plan to replace two windows this year and two windows next year so you can take full advantage of the credit instead of doing everything at once,” he 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 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 refundable amount and regularly adjusting it for inflation.
No one knows, however, when this might happen. Supporters said they want the new expanded child tax credit in effect for the 2024 tax filing season, which (clearly) has already begun. And while some parents may worry about the agency’s ability to quickly handle adding the credit to a batch of already filed tax returns, the IRS swears everything is under control.
“Taxpayers should file when they are ready to file,” IRS Commissioner Danny Werfel told reporters recently. “If there’s a change in the law that means, for example, they’re going to get an additional or greater credit, we’ll handle that at the IRS.”
Pickering agrees, pointing out that the government handles tax returns in the order it received them, and by waiting you’re simply “putting yourself much further back in the queue.”
So get moving and, as always, remember that the fastest way to get your tax refund is to file your claim digitally and choose direct deposit as your delivery method.
More from Money:
Tax season is here – here are the key dates to help you get your refund quickly
How to file taxes
The IRS has quietly made many more taxpayers eligible for its free file program