Tax Changes for 2024

The last quarter of the year is exciting and can also be a bit daunting. The weather is cooling, leaves are falling, the holidays are approaching. And then there are all the loose ends to tie up in our businesses that can feel a bit stressful or overwhelming. But what if we told you it doesn’t have to be that way? By doing a little each day, you can set yourself up for success so that you can relax and enjoy one of our favorite times of the year.  

As we near the end of 2024, there are several tax updates to be aware of and prepare for. And don’t worry, it’s nothing that your tax professional can’t handle but do we kind and give them plenty of time to support. 😉  

1. New BOI Filing Requirement (Beneficial Ownership Information):   

• What’s changing: Starting in 2024, certain small businesses will need to file Beneficial Ownership Information with the Financial Crimes Enforcement Network (FinCEN). This regulation aims to prevent money laundering by requiring companies to disclose the personal information of their beneficial owners. 

• Who it affects: Small businesses, especially LLCs, corporations, and partnerships created in the U.S. or registered to do business in the U.S., are impacted. Some businesses, like publicly traded companies and sole proprietors, are exempt—but check with your tax professional to be sure it is required for you or not. 

• Action: Small businesses should ensure they’re in compliance by gathering the necessary owner information before filing deadlines to avoid penalties. 

Want more detailed information about BOI filing requirements? Check out this recent blog post full of resources including how and where to file.  

2. Changes in Tax Brackets and Rates:  

• What’s changing: Adjustments to income tax brackets due to inflation could affect tax rates for entrepreneurs and small business owners.  

• Who it affects: This impacts owners of pass-through entities (like LLCs and S-Corps) who report business income on their personal tax returns. 

• Action: Recalculate your estimated tax payments to avoid underpayment penalties.  

2024 Federal Tax Brackets (for individual filers): 

• 10%: Up to $12,650 

• 12%: $12,651 – $55,300 

• 22%: $55,301 – $121,800 

• 24%: $121,801 – $245,050 

• 32%: $245,051 – $421,850 

• 35%: $421,851 – $633,800 

• 37%: Over $633,800 

For married filing jointly: 

• 10%: Up to $25,300 

• 12%: $25,301 – $110,600 

• 22%: $110,601 – $243,600 

• 24%: $243,601 – $490,100 

• 32%: $490,101 – $843,700 

• 35%: $843,701 – $1,267,600 

• 37%: Over $1,267,600 

These rates apply to personal income, including pass-through income from S-corps. For comparison, C corporations are subject to a flat corporate tax rate of 21%. This has not changed in 2024, but S-corps are not directly affected by this rate since their income passes through to the owners’ individual returns. 

3. Increased Section 179 Deduction and Bonus Depreciation Phase-Out: 

• What’s changing: For 2024, the Section 179 deduction, which allows businesses to expense certain equipment and property upfront, is increasing to $1.16 million. However, bonus depreciation, which has been 100%, will start phasing out (decreasing to 80% in 2024). 

• Who it affects: Small businesses purchasing up to $3,050,000 on capital purchases of machinery, equipment or vehicles (those who buy more may get a reduced deduction).   The maximum deduction for 2024 is $1,220,000.   

• Action: If planning to invest in significant assets, consider the timing of your purchases to maximize deductions. Consult with your tax professional prior to making any big changes.  

4. Qualified Business Income (QBI) Deduction:  

• What’s changing: The 20% deduction on qualified business income remains in place, but there may be further clarifications or legislative changes to eligibility rules. For 2024, the income threshold for phasing out the QBI deduction may increase due to inflation adjustments. 

• Who it affects: Sole proprietors, LLCs, partnerships, and S-Corporations. 

• Action: Review your income levels to ensure continued eligibility and consider tax planning strategies like deferring income or increasing retirement contributions to stay within thresholds. 

 5. 1099-K Reporting Threshold Changes Delayed:  

• What’s changing: Originally set for a significant drop, the 1099-K reporting threshold for third-party payment platforms (like PayPal or Venmo) has been delayed. The threshold is still $600, but full implementation may come in future years. 

• Who it affects: Freelancers and small businesses using payment platforms. 

• Action: Stay updated on reporting requirements and ensure accurate record-keeping for any payments received through these platforms. 

   6. Health Insurance Changes: 

• What’s changing: ACA updates and potential state-level changes may alter premium tax credits and available small business health insurance options for 2024. 

• Who it affects: Entrepreneurs offering health insurance to employees. 

• Action: Shop for the best plan and understand any changes to premium tax credit eligibility. 

 

This information is provided as an educational resource and does not take the place of consulting your tax professional. If you have any questions about these updates or how to file your Beneficial Ownership Information (BOI), reach out to your tax professional. Together we can make this a smooth holiday season and final quarter of 2024.  

Disclaimer: The information provided in this blog post is for informational purposes only and should not be considered as financial planning advice. Every individual’s financial situation is unique, and it is important to consult with a qualified tax professional or financial advisor before making any decisions regarding financial matters.