In today’s fast-changing world, managing finances and understanding tax laws can be challenging. With the 2024 Tax Relief Act introducing many new changes, it’s crucial to know how these updates might impact you. This blog will break down the new tax benefits and explain how they can help families, workers, and businesses. We’ll cover everything from increased tax credits to new business incentives, ensuring you’re well-informed about the opportunities and support available.
Understanding the Expanded Child Tax Credit (CTC)
The Child Tax Credit (CTC) helps reduce taxes for parents. The 2024 Tax Relief Act makes this credit even better.
Increased Refundable Amounts: In 2024, families can get up to $1,900 per child. This will go up to $2,000 in 2025, adjusted for inflation. Even if you owe little or no tax, you can still get a big refund.
Eligibility Changes: The income limits for the CTC are now higher. More families, especially those with moderate incomes, can qualify for the credit. This change helps more families get this benefit.
Prior-Year Income Option: The Act lets families use their income from the previous year to figure out their CTC. This helps if your income has changed, such as for gig workers or those who lost their jobs. It keeps your support steady even if your current income is lower.
The Expanded Earned Income Tax Credit (EITC)
The Earned Income Tax Credit (EITC) is important for low- to moderate-income workers, boosting their tax refunds. The 2024 Tax Relief Act makes this credit even better.
Flexible Income Calculation: You can use either your 2023 or 2024 income to calculate your EITC for the years 2024 and 2025. This helps if your income changes, like in gig jobs or seasonal work. By choosing the year with the higher income, you can get a bigger refund.
Broadened Eligibility: The Act makes it easier for more low-income workers to qualify for the EITC. This means even those with slightly higher incomes can now get this credit, offering more help.
Enhancing Educational Opportunities with the American Opportunity Tax Credit (AOTC)
Education is expensive, and the American Opportunity Tax Credit (AOTC) helps lower these costs.
Expanded Coverage: The 2024 Tax Relief Act broadens the AOTC to cover more expenses. It now includes course materials like textbooks and supplies, not just tuition and fees. This makes it easier for families to manage education costs.
Increased Refundability: The AOTC is partially refundable. Even if you owe no taxes, you can still get up to $1,000 back. This is especially helpful for low-income families.
Four-Year Limit: You can claim the AOTC for up to four years of college education. This helps families plan for college and eases the financial burden of getting a degree.
Business Incentives and Economic Growth
The 2024 Tax Relief Act also offers benefits for businesses, aiming to boost the economy.
Extended Depreciation Allowances: Businesses can now deduct the full cost of some assets, like machinery and equipment, in the year they are bought. This encourages businesses to invest and create jobs.
Support for Research and Development: The Act lets businesses delay deducting research and development costs until 2026. This helps companies invest in new technologies without immediate tax pressure.
Expansion of Small Business Provisions: The Act raises limits on the Section 179 deduction. This allows small businesses to deduct more costs for property, helping them grow and innovate.
