2024 Tax Season Updates: The Child Tax Credit & More

My Millennial finance tips this month focus on college savings, your future retirement needs, and the status of the child tax credit

Maybe you heard that eligibility rules for the child tax credit might change soon. Should you wait to file your taxes? What else about the 2024 tax season might you be missing?

*Editor’s Note: I originally published this article in my Millennial finance newsletter, which you also can get twice each month (for free) by adding your name here*

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New York Times journalist Tara Siegel Bernard recently compiled a helpful Q&A about your upcoming tax filing. Let’s review the questions that most impact Millennial families.

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The Child Tax Credit: What to Know for 2024

You should never wait to file your taxes, even if Congress may soon change a tax law. The IRS can distribute tax refunds retroactively, as needed.

In the case of the child tax credit, a bipartisan bill would temporarily expand the credit, primarily to lower-income families with multiple children.

For now, the child tax credit is worth up to $2,000 for each qualifying dependent under age 17. And that credit decreases once married filers’ income exceeds $400,000 ($200,000 for single filers and heads of household).

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State and Local Tax (SALT) Tax Break: What to Know for 2024

Before 2017, taxpayers could deduct all income, property, and sales taxes paid to state and local governments. No limitations. But the Tax Cuts and Jobs Act capped the SALT deduction at $10,000.

More than 30 U.S. states now offer different alternatives for bypassing the SALT deduction limit. The alternatives are complicated and vary widely. If your state and local taxes significantly exceed $10,000, you may want to ask a tax professional whether the alternative option in your state applies to you and your circumstances.

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Venmo and PayPal Payments: What to Know for 2024

The IRS wants online payment processors (Venmo, PayPal) and marketplaces (Airbnb, eBay) to more frequently report sales activity.

With that in mind, the agency previously announced that these companies must prepare to submit a Form 1099-K for everyone who receives payments in excess of $600 during the year. But for now, the IRS has pushed back that requirement.

Instead, the existing rules remain in place for another year.

And those rules apply to anyone selling goods and services who exceed 200 transactions and $20,000 in aggregate payments during the year. These individuals must receive a Form 1099-K to submit as part of their tax filing.

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Energy-Efficient Home Improvement Credit: What to Know for 2024

The 2022 Inflation Reduction Act created more generous tax breaks for energy-related expenses. And those tax breaks include energy-efficient homes.

Beginning with this tax filing, taxpayers may claim as much as $1,200 each year for qualifying home improvements made through 2032. These qualifying improvements include exterior doors, windows, and insulation materials. The IRS offers a separate tax credit, worth up to $2,000 annually, for new water heaters, heat pumps, and boilers.

In addition, the residential clean energy property credit also now remains available until 2032. Taxpayers may claim a credit worth 30% of qualified costs for purchasing solar panels, solar water heaters, or wind turbines.

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The Millennial Finance Newsletter: March 21, 2024

For your days ahead: 3 perspectives, 2 articles, and 1 idea from me.

​Three Perspectives

1 / What you should know for the ​2024 tax season​ (editor’s note: see the article discussed above!)

2 / Need help ​fighting a medical bill​? Learn from the expert.

3 / Not everyone needs a financial advisor. ​Here’s how you may know when you do​. ​

​Two Articles

1 / Trying to figure out how much money you’ll want in retirement? Check out this ​preview of how the process works​.

2 / A potential rule for college savings: no more than ​10% of what you’re saving for retirement​.

One Idea From Me

Regardless of where you live, choosing a 529 college savings plan is unnecessarily complex. And this feeling only increases when Congress modifies the rules. Here’s my latest on this dynamic:

1 / In 2022, Congress passed the SECURE 2.0 Retirement Savings Act. As part of this bill, 529 plan participants now can roll up to $35,000 from a 529 plan account into a Roth individual retirement account (IRA).

But this new option comes with several conditions that you must meet, so I updated my article on how D.C. families should think about selecting a 529 plan.

You can read more in The Best 529 Plans for D.C. Residents. (I have similar articles to help families understand the best 529 plan in Virginia and the best 529 plan in Maryland. And even if you live elsewhere, each of these articles offers a helpful 529 plan overview.)

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Your Questions About the Child Tax Credit and the 2024 Tax Season

I hope these articles help! Please feel free to send me an e-mail at kevin@illumintfc.com with any follow-up questions. You also can subscribe to my newsletter here to learn more about how you can turn your money into memories with your family. I typically send the newsletter twice each month.

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Recommended Reading

If you liked this article, you may also enjoy reading:

• Can a Simple Investing Strategy Work?
• Turning Your 529 Plan Into a Roth IRA

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About Kevin Mahoney, CFP®

Hi, I’m Kevin. I’m the founder of Illumint and a financial advisor in Washington, DC. I specialize in financial planning for Millennials like you. As a Millennial father and Certified Financial Planner™, I empower our peers to invest with confidence and flexibility. If you’re new to Illumint, I’m glad you’re here – you now have access to free personal finance tips written specifically for Millennial parents. I encourage you to read, watch, or listen to the ideas I share about exchanging your money for memories with your kids. And then when you’re ready, please send me your thoughts & questions!