Article Highlights:​

• Why File Taxes Early?

• Retirement & Savings Contributions

• Electric Vehicle (EV) Credit

• Online Sales & 1099-K Reporting

• I Bonds Purchases with Tax Refunds

• Energy-Efficient Home Improvements

• Tax Penalties for Underpayment  

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As tax season approaches, it's important to stay informed about changes and key considerations for filing 2024 taxes. Below are some essential updates and reminders to help taxpayers maximize deductions, avoid penalties, and comply with IRS regulations.

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Why File Taxes Early?

• Quicker Refunds: The sooner taxes are filed, the sooner refunds are processed and received.

• Reduced Identity Theft Risk: Filing early minimizes the risk of fraudulent tax returns being filed in your name.

• More Time to Find Deductions: Early filing allows time to identify additional deductions and tax-saving opportunities.

• Error Correction: Provides ample time to fix mistakes or adjust filings before the deadline.

• More Time to Pay Taxes Owed: If a balance is due, early filing allows more time to plan and pay without penalties.

 

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Retirement & Savings Contributions 

IRA Contributions - The tax-deductible contribution limit for the 2024 tax year is $7,000. Those aged 50 and older can contribute up to $8,000. Contributions for 2024 can be made until April 15, 2025.

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HSA Contributions - Individuals with self-only coverage can contribute $4,150. Those with family coverage can contribute $8,300. Individuals aged 55 and older can contribute an additional $1,000. If both spouses with family coverage are age 55+ (and not enrolled in Medicare), each may contribute the catch-up amount.

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Electric Vehicle (EV) Credit 

Purchasers of electric vehicles in 2024 must report the purchase to claim the tax credit. Even if the tax credit was applied at the dealership, it must be included in tax filings.​

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Clean Vehicle Credit: Up to $7,500, depending on

• Manufacturing location (must be in North America).

• Critical minerals sourcing (must be extracted/processed in the U.S. or a free trade country or be recycled in North America).

• Price limits: MSRP cannot exceed $80,000 for vans, SUVs, pickups or $55,000 for other vehicles.

• Income limits: No credit if modified adjusted gross income exceeds:

  • $300,000 (married filing jointly)

  • $225,000 (head of household)

  • $150,000 (single or other filers)​

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Online Sales & 1099-K Reporting 

Selling items online, such as concert tickets, goods, or services, may be taxable. The 1099-K reporting threshold for third-party payment platforms (e.g., PayPal, eBay) has dropped to $5,000 for 2024 (previously $20,000). A copy of the 1099-K is sent to the IRS, to ensure proper reporting. Gains from personal item sales must be reported, and applicable taxes must be paid.​​

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I Bonds Purchases with Tax Refunds 

As of January 1, 2025, taxpayers can no longer use part or all of their refund to purchase U.S. Savings Bonds (I Bonds).

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Energy-Efficient Home Improvements 

The credit rate is 30% of qualified expenses with an annual cap of up to $1,200 per year for home energy improvements. Non-refundable credit can only offset current tax liability (no carryover to future years).

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Specific limits:

• $600 annual cap for windows, skylights, and residential energy property expenditures.

• $250 per exterior door (up to $500 total).

• $150 additional credit for an energy audit performed by a certified home energy auditor.

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Tax Penalties for Underpayment 

More taxpayers are incurring penalties for underpayment of estimated taxes. There was an increase of 15% more taxpayers being hit with penalties, totaling 14 million taxpayers last year, according to the IRS. The underpayment penalty rate is currently set at 7% and is assessed quarterly. Setting correct estimated tax payments and/or adjusting withholdings can help avoid these common penalties.

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If you have questions related to any of the topics discussed in this article, please call the tax professionals at ProTax Service in Los Angeles at (310) 869-0038. We specialize in filing taxes for self-employed individuals, families, and small business tax preparation in Culver City, Playa del Rey, Westchester, Mar Vista, Santa Monica, and Marina del Rey.