Taxes can be complicated, but here’s a breakdown of the latest changes so you can get the most out of your tax return. Whether it’s about getting some extra cash back with tax credits or understanding how you can pay less tax with deductions, we’ve got you covered.
It’s crucial for taxpayers to stay informed about the latest tax credits and deductions, ensuring they leverage every opportunity to optimize their tax returns. From the expanded Earned Income Tax Credit (EITC) to the evolving landscape of the Child Tax Credit, understanding these changes is key to efficient tax planning and filing.
Changes to the Income Tax Brackets
First, you should know that the income tax brackets shifted a bit. This is normal; they often change to reflect changes in cost of living. There are still seven tax rates, but each rate’s income ranges (tax brackets) have shifted slightly to account for inflation.
For the 2024 tax year (returns filed in 2025), the following rates and income ranges apply:
| Tax rate | Single filers | Married couples filing jointly (and qualifying widows or widowers) |
| 10% | $0 to $11,600 | $0 to $23,200 |
| 12% | $11,601 to $47,150 | $23,201 to $94,300 |
| 22% | $47,151 to $100,525 | $94,301 to $201,050 |
| 24% | $100,526 to $191,950 | $201,051 to $383,900 |
| 32% | $191,951 to $243,725 | $383,901 to $487,450 |
| 35% | $243,726 to $609,350 | $487,451 to $731,200 |
| 37% | $609,351 or more | $731,201 or more |
Lowering Your Taxable Income & Boosting Your Tax Return
Think of tax deductions like discounts that lower how much of your income can be taxed. This means you pay less in taxes. These “discounts” come from spending money on things like giving to charity, paying interest on your home loan, or business costs.
Tax credits are even cooler because they directly cut down how much tax you owe, dollar for dollar. So, if you owe $1,000 in taxes and get a $200 tax credit, now you only owe $800.
Unlike deductions that lower your taxable income, credits can straight-up reduce your tax bill or make your refund bigger. Let’s check out some updates to these deductions and credits that people often use.
1. Standard Deduction
Imagine the standard deduction as a one-size-fits-all discount on your taxes. The government says, “Hey, we’ll let you reduce your taxable income by this set amount, no questions asked.”
People often go for the standard deduction because it’s easy and guaranteed. You don’t need to keep track of all your expenses or fill out extra forms. It’s like choosing a pre-set meal at a restaurant instead of picking each dish individually — quicker and simpler.
For tax year 2024, which you’ll most likely file by April of 2025, the standard deduction amounts increased to:
- $29,200 if married filing jointly or qualifying surviving spouse
- $21,900 if head of household
- $14,600 if single or married filing separately
For the 2025 tax year (which Americans will file in the year 2026), the standard deduction amounts are set to increase to:
- $30,000 if married, filing jointly or qualifying surviving spouse
- $22,500 if head of household
- $15,000 if single or married filing separately
Most people go with the standard deduction because it’s less hassle and still offers a decent tax break. Choosing to itemize, on the other hand, is like saying, “I think I spent enough on specific things (like mortgage interest, charity donations, or medical expenses) that, if I add them all up, they’ll give me a bigger tax break than the standard deduction.”
It takes more work because you need to prove all those expenses, but it can pay off if your total is higher than the standard deduction.
Earned Income Tax Credit (EITC) Expansion
The EITC is like a bonus for working and self-employed taxpayers, especially if they have kids. It helps by lowering the amount of tax you owe, and it might even score you a refund.
If you’re in the running for the EITC, here’s what you could get:
- $632 if you don’t have any kids.
- $4,213 if you’ve got one kid in tow.
- $6,960 if you’re juggling two kids.
- $7,830 if you’re managing a crew of three or more kids.
How much money you can make and still get the EITC depends on how you file your taxes and how many kids are depending on you. For example, if you’re married and filing together, and you have three or more kids, you can earn up to $66,819 and still qualify for the EITC.
2. Child Tax Credit (CTC) Adjustments
Think of your kid as a tax write off (as well as a black hole for money). The Child Tax Credit has undergone several modifications in recent years aimed at providing additional support to families. The structure for the 2024 tax year:
- Up to $2,000 for each qualifying child under 17
- Nonrefundable, but certain taxpayers could get back up to $1,700 of it as a partial refund via the additional child tax credit when they file their taxes in 2025
- The amount you can get from this credit starts to go down if your modified adjusted gross income is more than $400,000 (married couples filing together) or $200,000 (for other tax filing statuses)
While the specifics of the CTC may continue to evolve, staying informed through a trusted tax professional can help you navigate these changes and understand how they impact your tax return.
3. Home Office Deduction: A Sign of the Times
With the shift towards remote work, the home office deduction has become more relevant than ever. The IRS provides two methods for calculating the home office deduction: the simplified option and the regular method.
- The simplified option, introduced in 2013, allows taxpayers to calculate their deduction at a standard rate of $5 per square foot of the home used for business, with a maximum of 300 square feet, equating to a maximum deduction of $1,500.
- The regular method involves calculating the actual expenses of your home office space, including a portion of utilities, mortgage interest, insurance, maintenance, and depreciation. This method requires more detailed record-keeping and calculation.
It’s important to check the latest IRS guidelines or consult with a tax professional for the most current information, as tax laws and deduction rates can change.
4. Retirement Savings Contributions Credit (Saver’s Credit)
The “saver’s credit” is like a reward from the government for putting money into your retirement account. It can reduce your taxes by up to $1,000 or $2,000 if you’re married and file taxes together. To qualify in 2025, you need to:
- Be at least 18 years old.
- Not be a full-time student.
- Not be listed as a dependent on someone else’s tax form.
- Earn below certain amounts, depending on how you file your taxes:
- o $76,500 for couples filing together.
- o $57,375 if you’re the head of your household.
- o $38,250 for most other tax filers.
This credit looks at the amount you add to your retirement savings, like in a 401(k), IRA (both traditional and Roth), or other specific retirement accounts. How much you get back from the saver’s credit (either 50%, 20%, or 10% of your contributions) depends on your income and filing status, but there’s a cap on the maximum amount you can get.
In 2025, the max you can contribute to an IRA (traditional or Roth) increased to $7,000. If you’re 50 or older, you’re allowed to put in an extra $1,000 as a “catch-up” contribution to help you save more as you get closer to retirement.
Also, for 401(k)s and Roth 401(k)s, the contribution limit went up to $23,500. And if you’re over 50, you have the option to contribute an additional $7,500 on top of that as a catch-up contribution, giving you a bigger chance to increase your retirement savings this tax year.
Consulting a CPA: Your Guide Through the Tax Maze
The ever-changing landscape of tax laws and regulations highlights the importance of professional guidance. Searching for a “CPA near me” can connect you with experts adept at navigating these complexities, ensuring you file taxes accurately while maximizing your benefits.
Utilizing Software and Professional Services
For those inclined towards DIY tax filing, numerous software options can streamline the process, offering guidance on deductions and credits. However, for more complex situations or to ensure you’re capitalizing on all available tax incentives, consulting with a CPA can be invaluable.
By Admin –
