eZ US Tax & Finance

Education Tax Credits

Two tax credits are available to persons who pay expenses for higher (postsecondary) education:

Lifetime Learning Credit

American Opportunity Credit

	American Opportunity Credit	Lifetime Learning Credit
Maximum credit	$2,500 credit per eligible student	$2,000 credit per return
MAGI limit	Credit phase-out begins if MAGI is over $160,000 MFJ and $80,000 S, HH, or QSS No credit if MAGI is $180,000 or more MFJ and $90,000 or more S, HH, or $138,000) and married couples filing QSS
Refundable or nonrefundable	40% refundable	Nonrefundable credit limited to tax liability
Availability	Available ONLY for first 4 years	Available ALL years AND for courses to acquire or improve job skills
Number of tax years credit available	Available ONLY for 4 tax years per eligible student	Available for an UNLIMITED number of years
Type of degree required	Student must be pursuing an undergraduate degree or other recognized education credential	Student does not need to be pursuing a degree or other recognized education credential
Number of courses	Student enrolled at least half-time for at least one academic period beginning in the tax year	Available for one or more courses
Felony drug conviction	No felony drug convictions on student’s records	Felony drug convictions permitted
Qualified expenses	Books, supplies, and equipment do not need to be purchased from the institution in order to qualify	Tuition and required enrollment fees, including required amounts paid to the institution for course-related books, supplies, and equipment

Comparing Traditional and Roth IRAs

Rules	Roth IRA	Traditional IRA
2024 Contribution Limits	$6,500; $7,500 if age 50 or older.	$6,500; $7,500 if age 50 or older.
2024 Income Limits	Single tax filers with MAGIs of less than $153,000 (phaseout begins at $138,000) and married couples filing jointly with MAGIs of less than $228,000 (phaseout begins at $218,000) are eligible.	Anyone with earned income can contribute, but tax deductibility is based on income limits and participation in an employer plan.
Age Limits	No age limitations on contributions.	No age limitations on contributions.
Tax Treatment	No tax deductions for contributions; tax-free earnings and withdrawals in retirement.	Tax deduction in contribution year; ordinary income taxes owed on withdrawals.
Withdrawal Rules	Contributions can be withdrawn at any time during the tax year, tax-free and penalty-free. Five years after your first contribution and age 59½, earnings withdrawals are tax-free, too.	Withdrawals are penalty-free beginning at age 59½.
Required Minimum Distribution	None for the account owner. Account beneficiaries are subject to the RMD rules.	Distributions must begin at age 73 for account owners born between 1951 and 1959 and 75 for those born in 1960 or later. Beneficiaries are also subject to the RMD rules.

Energy Efficient Home Improvement Credit

Taxpayers that make qualified energy-efficient improvements to their home after January 1, 2024, may qualify for a credit of up to $3,200.

The credit is allowed for qualifying property placed in service on or after January 1, 2024, and before January 1, 2033.

The maximum credit taxpayers can claim each year is:

$1,200 for energy property costs and certain energy-efficient home improvements, with limits on doors ($250 per door and $500 total), windows and skylights ($600 total), and home energy audits ($150)
$2,000 per year for qualified heat pumps, biomass stoves, or biomass boilers

Residential Clean Energy Property Credit

Taxpayers that invest in renewable energy for their home may qualify for an annual residential clean energy tax credit. The Residential Clean Energy Credit equals 30% of the costs of new, qualified clean energy property for the taxpayer's home installed anytime from 2022 through 2033.

Qualified expenses include the costs of new clean energy property including:

Solar electric panels
Solar water heaters
Wind turbines
Geothermal heat pumps
Fuel cells
Battery storage technology (beginning in 2024)
Qualified expenses may include labor costs for onsite preparation, assembly, or original installation of the property and for piping or wiring to connect it to the home

Credit for New Clean Vehicles Purchased in 2024 and After

The Inflation Reduction Act of 2022 changed the rules for this credit for vehicles purchased from 2024 to 2032. Taxpayers that place in service a new plug-in electric vehicle (EV) or fuel cell vehicle (FCV) in 2024 or after, may qualify for a new clean vehicle credit.

Taxpayers may qualify for a credit of up to $7,500 if they buy a new, qualified plug-in EV or FCV. The credit is nonrefundable and taxpayers can not apply any excess credit to future tax years

Credit for Used Clean Vehicle

Taxpayers may qualify for a credit for buying a previously owned qualified plug-in electric vehicle (EV) or fuel cell vehicle (FCV), including cars and light trucks. Beginning January 1, 2024, taxpayers that buy a qualified used EV or FCV from a licensed dealer for $25,000 or less, may be eligible for a used clean vehicle credit (also referred to as a previously owned clean vehicle credit).

The credit equals 30% of the sale price up to a maximum credit of $4,000. The credit is nonrefundable and taxpayers can not apply any excess credit to future tax years.

Retirement Plan Contribution Changes

In 2024, taxpayers can increase their contributions to tax-advantaged retirement savings plans. The contribution limit for employees who contribute to 401(k) and 403(b) plans increases to $23,000 annually, up from $22,500. Employees aged 50 and over can contribute an additional $7,500, for a total of $30,500. The IRA contribution limit for 2024 is $7,000 for workers under the age of 50 and $8,000 for those over 50. This is an increase from 2023, when the limit was $6,500 and $7,500 for people over 50

Tax Credits & Deductions

If you plan to itemize deductions rather than take the increased standard deduction described above, you may benefit from increased tax credits and deductions. Deductions can be varied and complicated, so looking at the IRS page about deductions and working with a tax professional can help you determine which options are right for you. For example, the maximum tax credit for adoption expenses increased to $16,810 from $15,950.

Do You Qualify for the Earned Income Tax Credit?

Workers who earn a low to moderate income may be able to reduce their tax liability through the earned income tax credit. Those who qualify for this tax credit can use it to lower their tax bill and, in certain instances, increase their tax refund. Here are the earned income tax credit requirements for 2024:

Here are the earned income tax credit requirements for 2024:

Dependents	Maximum possible credit	Income limit for single, head of household or widowed filers	Income limit for married filing jointly filers
0	$632	$18,591	$25,511
1	$4,213	$49,084	$56,004
2	$6,960	$55,768	$62,688
3 or more	$7,830	$59,899	$66,819

In addition to meeting the income limit requirements above, IRS requirements for the earned income tax credit include:

Investments in 2024 totaling $11,600 or less.

No foreign earned income that required form 2555 or 2555-EZ in 2024.

Filers must be at least age 25 and no older than 65 if filing for the credit without children or dependents.

There are other stipulations and rules that might qualify or disqualify you from receiving the earned income tax credit. If you're not certain if you qualify for the credit, consult IRS guidance or your tax advisor.

Consider Tax Credit Options for Large Purchases

Taxpayers who purchase an electric vehicle in 2024 may qualify for a tax credit up to $7,500. Rather than waiting until you file taxes next spring, you can actually take the credit as a rebate when you buy the vehicle—or as a discount on the price of your EV.

To get the clean vehicle tax credit, you must meet income limits and attest that you’re purchasing the vehicle for your own use, to be used in the United States. Not every EV qualifies, so check FuelEconomy.gov to find out whether the vehicle you’re considering will allow you to take the credit.

Additional 2024 Tax Changes to Know About

The IRS has made a variety of other changes that may affect your tax liability for tax year 2024.

New tax threshold on capital gains. Capital gains taxes are levied on the sale of capital assets, such as stocks, bonds, valuable items like jewelry and real estate. For the 2024 tax year, individual tax filers will not have to pay any capital gains tax if their total taxable income is $47,025 or less. That’s an increase from the income threshold of $44,625 in 2023. The capital gains tax rate jumps to 15% if your income is $47,026 to $518,900. If your income is higher than that, you’ll pay 20% in capital gains if you sell your investments.

Changes to the kiddie tax. For a child wage earner under age 19, the first $1,300 of any unearned income is tax free in 2024. According to the IRS, "unearned income" includes investment-type income such as taxable interest, ordinary dividends, and capital gain distributions. The next $1,300 is taxed at the child’s rate. Any unearned income above $2,600 is taxed at the parents’ tax rate.

Flexible spending account increases. The dollar limit for flexible spending accounts (FSA) increases to $3,200 in 2024. If you don’t use all the money in your FSA and your plan allows you to carry over unused amounts, you can carryover up to $640 in this tax year.

Health savings account deductible increases. To qualify for a health savings account (HSA) in 2024, participants' insurance plans must have an annual deductible between $2,800 and $4,150 for individuals, with a maximum out-of-pocket expense amount of $5,550. For family coverage, the annual deductible must be between $5,550 and $8,350, with an out-of-pocket expense limit of $10,200. If you participate in an HSA plan, you can contribute more to your plan this year: up to $4,150 for individuals and up to $8,300 for families.

Increased foreign earned income exclusion. If you earn income in a foreign country or from an employer in a foreign country, you may benefit from the foreign earned income exclusion, which increased to $126,500 in 2024.

Estate exemption increase. If a family member dies during 2024, their estate has a basic estate tax exclusion amount of $13.6 million, an increase from $12.92 million for estates owned by people who died in 2023.

Gift tax exclusion increase. If you want to give money to friends or family members, you can give up to $18,000 to everyone in 2024 before incurring gift tax. That’s an increase over the $17,000 exclusion in 2023.