We’re not the only ones who can get festive this time of year. In the spirit of giving, the IRS recently released important updates for the 2024 tax year to adjust for inflation.
They’re increasing the Standard Deduction — up to $29,200 for married filing jointly, up to $14,600 for single or married filing separately, and up to $21,900 for heads of households. The Earned Income Tax Credit is also getting a boost (up to $7,830 for those with three or more qualifying children).
Transportation fringe benefits and parking limits will go up to $315/month, health flexible spending arrangement contributions will increase to $3,200, and deductibles and out-of-pocket limits increase for both self-only and family medical coverage.
Just a reminder here: These changes apply to tax returns filed in 2025.
Now, before I get to the 2024 filing season, let me first address the looming government shutdown… feeling some deja vu on that? Yeah, once again Congress has a week to decide on a government budget for next year. If they don’t, there are some big implications for Thanksgiving travels — something some TSA workers have thoughts about.
Right now, there’s a laddered plan on the table, but it will likely meet with strong opposition in the Senate and the White House both of whom prefer a straightforward government funding extension without any gimmicks. We’ll keep you posted on those developments.
While I can’t keep Congress nimble on financial matters, I am here to help you. With only a month and a half before year-end, make sure to consider all those EOY moves you can make to reduce your 2023 tax liability. Want to discuss retirement distributions, capital gains and losses, or even make updates with your New York/New Jersey Metro tax status to accommodate for life changes this year? I’m here but don’t wait to get on my calendar:
calendly.com/info-tax718/15min
While many life changes are happy ones, some are quite difficult to maneuver… like divorce. I’m always here to support my clients through every moment, including the difficult ones. So, let’s take today for some guidance on divorce and taxes, so you can be positioned well for the next chapter.
Lillian Turner-Bowman’s Guide to Divorce and Taxes
“A divorce is like an amputation: you survive it, but there’s less of you.” – Margaret Atwood
If you’ve gone through a divorce, you know your world gets turned upside down. Put together divorce and taxes and the complexity can feel overwhelming.
There are a lot of challenges you’re facing – the confusion, the uncertainty, and the worry about making the right decisions.
In the midst of this upheaval, having someone in your corner to help you navigate your New York/New Jersey Metro finances and tax standing with confidence is breath to your lungs.
That’s one of the goals of this guide — but I’m here to sit down with you at any time to discuss the tax logistics of your divorce as well.
calendly.com/info-tax718/15min
Here’s a practical, 6-step guide to help you navigate things with greater ease and understanding.
1. Filing status: Your first step
Your filing status depends on your marital status as of December 31. If divorced by that date, you cannot file jointly. If still married, you have the option to file jointly or separately. For 2023, the standard deductions are $27,700 for joint filers, $13,850 for singles and married filing separately, and $20,800 for heads of households.
2. Update your W-4
Once you’re divorced, it’s crucial to update your W-4 form with your employer. This form determines your tax withholding based on your marital status. After a divorce, your tax situation changes, and updating your W-4 ensures that the correct amount of tax is withheld from your paychecks.
3. Child support and dependency
Child support payments are neither taxable income nor tax-deductible. However, determining which parent claims the child as a dependent is crucial for tax benefits, such as the Child Tax Credit. The primary custodial parent typically has the right to claim the child, but this can be adjusted based on your divorce agreement.
4. Asset division
The division of assets during a divorce can have significant tax implications. Transferring properties and splitting retirement accounts can trigger capital gains taxes or penalties. Understand the tax basis of each asset and plan accordingly.
5. Legal and professional fees
The cost of legal advice specifically related to tax issues in your divorce can be deductible. However, general legal expenses for divorce proceedings are not.
6. State taxes
Each state has its own set of rules regarding divorce and taxes. This is particularly important for issues like alimony, which can be treated differently for state tax purposes.
Bonus tip: Get expert guidance
Talking to your tax Brooklyn professional (whether it’s us or someone else) can be invaluable. We can help you make informed decisions and do them in the right way at the right time. This is what we do every day, and we’re happy to do it for you.
Every decision you make at the end of a marriage is also a step towards a new beginning. Finding your footing in a changed landscape, moving forward with confidence and clarity — these can be difficult.
So, getting the right support and guidance on divorce and taxes as you navigate the transition is the difference-maker. We’re here for you… to help you build a strong foundation for the next chapter of your life.
calendly.com/info-tax718/15min
Your financial well-being matters.,
Lillian Turner-Bowman
