What’s New for 2024 including new enacted legislation and IRS regulations (individual and business)

Standard Deduction – The standard deduction has been increased for all filers.

• $14,600 – Single or Married filing separately.
• $29,200 – Married filing jointly or Qualifying surviving spouse
• $21,900 – Head of Household

Missouri individual tax return – Public Pension Exemption and Social Security/Social Security Disability Deduction.

Beginning on or after January 1, 2024 the income limitation is removed based on filing status when calculating the public pension exemption and the social security/social security disability deduction. The public pension exemption is still limited by the maximum social security benefit for the year. 

H.R. 5863 – Federal Disaster Relief Act of 2023 (Enacted December 12, 2024)

Personal casualty losses attributable to a major disaster declared by the President under section 401 of the Robert T Stafford Disaster Relief and Emergency Assistance Act (Stafford Act) in 2016 as well as from Storm Hurricane Harvey, Tropical Storm Harvey, Hurricanes Irma and Maria, and the California Wildfires, may be claimed as a qualified disaster loss. You can deduct qualified disaster losses without itemizing other deductions on Schedule A (Form 1040). Moreover, your net casualty loss from these qualified disaster doesn’t need to exceed 10% of your AGI to qualify for the deduction, but the $100 reduction per casualty is increased to $500. 

Updated reporting requirements for Form 1099-K

For 2024, payment card companies, payment apps, and online marketplaces will be required to send you a Form 1099-K when the amount of your business transactions during the year is more than $5,000. In calendar year 2025, the threshold will lower to more than $2,500 and for 2026 and later years, the threshold will be more than $600.

Exception to the 10% additional tax for early distributions

Beginning in 2024, the exception to the 10% additional tax for early distributions includes distributions from a retirement plan to pay for certain emergency personal expenses and to victims of domestic violence.

Choosing to treat a nonresident alien or dual-status alien spouse as U.S resident

You or your spouse can choose to treat a nonresident alien or dual-status alien spouse as a U.S. resident for 2024.

Surviving spouse election to be treated as employee

Beginning in 2024, a surviving spouse who is the designated beneficiary of an employee covered by a qualified retirement plan (or other plan to which the required minimum distribution rules apply) or who is the designated beneficiary of an IRA owner, may elect to be treated as the employee for purposes of the required minimum distribution rules. This election would be beneficial if surviving spouse is younger than deceased spouse.

IRS Issues Final Regulations on Inherited IRA-July 19, 2024

There’s a 10-year clean-out requirement. It applies to many IRAs inherited after 2019. Funds must be distributed within 10 years after death. So, if an IRA owner dies in October 2024, the beneficiary must clean out the IRA no later than December 31, 2034.

Eligible designated beneficiaries are exempt from the 10-year rule. This applies to surviving spouses or minor children (until age 21), the chronically ill or disabled, and people who are not more than 10 years younger than the decedent. They can still do stretch IRAs. The same rule applies for individuals who inherited IRAs before 2020. A surviving spouse also has the option to take the inherited IRA as his or her own.

The key issue is whether an IRA owner dies before or after his or her RMD beginning date.

1. If the owner dies before the RMD required beginning date, then beneficiaries needn’t take annual payouts. They can opt to wait until year 10 to take the money, get yearly distributions, or skip years, provided the IRA is fully depleted by the end of the 10-year period.
2. If the owner dies on or after the RMD required beginning start date, annual payouts are required. Beneficiaries must take yearly RMDs over the 10-year period, beginning with the year after the original IRA owner died. This means RMDs must be paid to the beneficiary in years 1 through 9, with the rest of the account fully depleted by year 10. In this situation, the beneficiary figures annual RMDs based on his or her own life, so the younger the beneficiary, the smaller the yearly RMD amounts.

Standard Mileage Rate

The business standard mileage rate for 2024 has increased to 67 cents per business mile. Beginning January 1, 2025, the standard mileage rates for the use of a car, van, pickup or panel trust will be 70 per business mile.

Taxpayers using the standard mileage rate for a vehicle they own and use for business must choose to use the rate in the first year the automobile is available for business use. Then, in later years, they can choose to use the standard mileage rate or actual expenses.

Special rule for certain distributions from long-term qualified tuition programs to Roth IRAs.

Section 126 amends the Internal Revenue Code to allow for tax and penalty free rollovers from 529 accounts to Roth IRAs, under certain conditions. Beneficiaries of 529 college savings accounts would be permitted to rollover up to $35,000 over the course of their lifetime from any 529 account in their name to their Roth IRA. These rollovers are also subject to Roth IRA annual contribution limits, and the 529 account must have been open for more than 15 years.

Maximum net earnings

The maximum net self-employment earnings subject to the social security part (12.4%) of the self-employment tax is $168,000 for 2024. There is no maximum limit on earnings subject to the Medicare part (2.9%) or, if applicable, the Additional Medicare Tax (0.9%). The maximum  net self-employment earnings subject to the social security part of the self-employment tax for 2025 is $176,100.