Taxpayers have witnessed many major tax news from the IRS during the tax season 2023-24. One of them is getting a bigger refund in 2024. Truth be told, taxpayers are likely to receive a hike in their refunds this year as the Internal Revenue Service (IRS) has made adjustments in tax provisions for inflation.
As per the IRS update, the tax refund has seen a boom of 4% till February 2023 from the average refund at this time last year. Not just the changes in standard deductions or credits, there are increments in Child Tax Credit (CTC) and Earned Income Tax Credit (EITC) as well that contributed to this hike. Let’s discuss this subject in detail here!
More Refunds for Taxpayers in 2023
Last year, the IRS reported a lower tax refund as compared to the year 2022. As per the IRS data, there was a decline of 11% in refunds in 2023 from 2022. It was mainly due to the high inflation and the end of pandemic benefits.
But this year, the IRS has made adjustments in tax provisions for inflation to boost the overall tax refund for taxpayers. Also, other changes from the IRS would increase the overall tax refund greatly. Here are the affected areas you need to know about:
1. Adjustments in Tax Provisions
Due to the lower tax refund and high inflation, Americans were facing financial challenges. Taking this into consideration, the IRS has decided to level up 2024’s average tax refund by introducing modifications to tax provisions due to inflation.
For the 2023 tax year, there is an increase of 7% in the standard deduction and tax brackets. It is a big improvement from the previous year and has given relief to taxpayers facing financial pressure.
Due to this, some taxpayers would fall into lower tax brackets. Also, they can enjoy more deductions of their tax revenue while opting for standard deductions.
The revised tax provisions by the IRS align with a formula established by Congress to accommodate inflation. Still, exploiting these amended tax provisions isn’t an easy task and it demands expert guidance from tax professionals.
Whether you deal with refunds for individual or business purposes, you should consider opting for expert tax solutions to maximize your savings and avoid financial errors.
2. Boost in Earned Income Tax Credit (EITC)
Families with lower incomes can also take advantage of the adjusted tax provisions even if they don’t benefit from increased standard deduction. For the 2023 tax year, the IRS has introduced a maximum raise of the earned income tax credit (EITC) amount by around $500.
The best part is that eligible taxpayers would receive the total amount (100% refundable) as a refund. Therefore, they would see a significant amount to cope with inflation and meet their expenses effectively.
3. Increase in Child Tax Credit (CTC)
Recently, the U.S. House of Representatives passed the bill “Tax Relief for American Families and Workers Act” to amend the Child Tax Credit (CTC). If enacted, this bill will increase the refunds for families to a great extent.
As per the bill, the maximum refundable amount per child for different years would see a good hike from the current value of $1600 as follows:
For 2023: $1800
For 2024: $1900
For 2025: $2000
There would be retroactive changes to the Child Tax Credit and it would level up the amount of refunds significantly. Also, there would be more increments in refunds to inflation after the tax year 2025.
Back in 2021, the American Rescue Plan raised the CTC but it was terminated by the end of the year. The change was as follows:
Children Ages 6 and Over: $2000 to $3000
Children Under 6: $2000 to $3600
Families are anticipating the implementation of the new child tax credit (CTC). However, its enactment is less likely to take place during the 2024 tax filing season due to the delay in the bipartisan tax bill, which encompasses the expansion of the CTC.
4. Clean Energy-Related Tax Breaks
In 2023, new tax incentives were rolled out to promote the adoption of clean energy vehicles and encourage energy-efficient home improvements. Leveraging these incentives could lead to a boost in taxpayers' overall refunds.
Most taxpayers are unaware of taking full advantage of these deductions. Therefore, it becomes important for them to consult outsource tax preparation services to execute their tax works accurately and efficiently.
Is there any Chance for Tax Refunds to be Lowered?
Yes, there are chances for your federal tax refund to be lower than in previous years. It could happen in the following cases:
If your dependent child’s age is 17 or more in 2023, it would lead to their disqualification for the CTC.
Separation from a spouse or adult dependent leaving home would lessen the refund amount.
If your or your spouse’s income sees a big hike, you will not get the claim for some credits.
If you underpay for your 2023 tax payments, you will have to pay more at the time of tax filing.
Conclusion
Summing up, we would say that inflation-stricken Americans are excited about receiving more tax refunds in 2024. The adjusted tax provisions by the IRS can help taxpayers save a big amount through refunds.
The high refunds aren’t just beneficial for the people to lessen their financial burden but they are also good for the economic boom. The deadline to file taxes is April 15 and delaying filing taxes could change the tax refund amount significantly.
Therefore, you should consider filing your taxes at the earliest to get a good amount of tax refund. And to receive your funds on time, you should consider the e-filing option for tax filing. It would help you get your refund through direct deposit within 3 weeks.
You can receive updates on your tax return status through "Where’s My Refund" within 24 hours of IRS acceptance.