What major tax changes took effect on January 1, 2024?

Key changes include bonus depreciation dropping to 60%, the Corporate Transparency Act BOI reporting requirement taking effect, a $5,000 transitional 1099-K threshold, the estate tax exemption rising to $13.61 million, higher retirement plan contribution limits, and updated energy credit requirements including FEOC restrictions.

How does the bonus depreciation drop to 60% affect business planning in 2024?

With bonus depreciation at 60% in 2024, businesses can only immediately deduct 60% of qualifying property costs, down from 80% in 2023 and 100% in prior years. Business owners should coordinate capital expenditure timing with Section 179 expensing to maximize first-year deductions on equipment and property.

New Tax Laws for 2024: What Changed on January 1 | Lynch Law

January 1, 2024, brought a wave of tax and regulatory changes that affect virtually every business owner and individual taxpayer. Some of these changes were long anticipated — scheduled provisions of prior legislation finally taking effect — while others are the result of annual inflation adjustments or new regulatory requirements. This post provides a concise roundup of the most significant changes now in effect.

Bonus Depreciation Drops to 60%

The TCJA's bonus depreciation phase-down continues, with the first-year depreciation rate dropping from 80% in 2023 to 60% for property placed in service in 2024. The Tax Relief for American Families and Workers Act, which would retroactively restore 100% bonus depreciation, remains pending in the Senate. Until legislation is enacted, businesses should plan based on the 60% rate and consider whether accelerating or deferring capital expenditures to align with the phase-down schedule makes sense for their particular circumstances.^[1]

Section 179 expensing limits have increased to $1,220,000 for 2024, with the phase-out threshold rising to $3,050,000. This increase partially offsets the decline in bonus depreciation for businesses with qualifying property purchases below the phase-out threshold.

Retirement Plan Changes

Several SECURE 2.0 provisions take effect in 2024. The 401(k) elective deferral limit increases to $23,000 ($30,500 with catch-up contributions for those age 50 or older). The IRA contribution limit is $7,000 ($8,000 with catch-up). The annual compensation limit for retirement plan purposes increases to $345,000. The required minimum distribution age remains 73 for individuals who turned 72 after 2022 and will increase to 75 in 2033.^[2]

New for 2024, SECURE 2.0's mandatory automatic enrollment provision applies to new 401(k) and 403(b) plans established after December 29, 2022. Eligible employees must be automatically enrolled at a contribution rate of at least 3% (but not more than 10%), with automatic annual increases of 1% up to at least 10% (but not more than 15%). Existing plans are exempt from this requirement.

Corporate Transparency Act in Effect

The BOI reporting requirement is now live. Companies formed in 2024 must file within 90 days of receiving notice of creation. Existing companies have until January 1, 2025. The penalties for willful noncompliance are severe — up to $500 per day in civil penalties and criminal penalties of up to two years' imprisonment and $10,000.

Form 1099-K: $5,000 Transitional Threshold

For 2024, third-party settlement organizations (PayPal, Venmo, Etsy, eBay, etc.) must file Form 1099-K for any payee who receives more than $5,000 in gross payments. This is a significant reduction from the prior $20,000/200-transaction threshold that applied through 2023, though it remains above the statutory $600 threshold that Congress enacted but the IRS has been unable to implement. Business owners and self-employed individuals who receive payments through these platforms should ensure their tax return preparation can reconcile 1099-K gross proceeds with actual taxable income.^[3]

Estate and Gift Tax Exemption

The federal estate and gift tax exemption increases to $13,610,000 per person for 2024 ($27,220,000 for married couples). This is the second-to-last year of the elevated exemption — it is currently scheduled to revert to approximately $7 million (adjusted for inflation) after December 31, 2025. The annual gift tax exclusion increases to $18,000 per donee (up from $17,000 in 2023).^[4]

For those with taxable estates potentially above the post-sunset exemption, 2024 represents one of the last opportunities to make large, tax-free gifts using the elevated exemption. This is particularly relevant for business owners with closely held business interests that can be transferred using valuation discounts.

Energy Tax Credits

The Inflation Reduction Act's enhanced energy tax credits continue into 2024 with some modifications. The Section 45 production tax credit and Section 48 investment tax credit remain available with the prevailing wage and apprenticeship requirements for the full credit amount. The clean vehicle credit under Section 30D now requires point-of-sale application — dealers can advance the credit to the buyer at the time of purchase, reducing the upfront cost of qualifying electric vehicles. Income and MSRP limits continue to apply.^[5]

Standard Deduction and Tax Brackets

For 2024, the standard deduction increases to $14,600 for single filers and $29,200 for married couples filing jointly. The top marginal income tax rate remains 37% on taxable income exceeding $609,350 (single) or $731,200 (MFJ). The qualified business income deduction thresholds under Section 199A increase to $191,950 (single) and $383,900 (MFJ). The alternative minimum tax exemption is $85,700 (single) and $133,300 (MFJ).

These annual adjustments are routine but cumulatively significant. Tax planning that incorporates the updated thresholds and limits — rather than relying on prior-year figures — can produce meaningful savings, particularly for taxpayers near the boundaries of rate brackets, deduction phase-outs, and credit eligibility.

References

^[1] IRC § 168(k)(6)(A). The Tax Relief for American Families and Workers Act of 2024 (H.R. 7024) passed the House on January 31, 2024, with a vote of 357-70 but awaits Senate action.
^[2] Rev. Proc. 2023-34 (setting cost-of-living adjustments for retirement plan limits effective January 1, 2024).
^[3] See our prior discussion of the 1099-K threshold delays. Notice 2023-74 established the $5,000 transitional threshold for 2024.
^[4] Rev. Proc. 2023-34. The annual exclusion increase from $17,000 to $18,000 is the first increase since 2022.
^[5] IRC § 30D, as amended by the Inflation Reduction Act § 13401. The point-of-sale credit transfer mechanism is new for 2024 and allows buyers to assign the credit to the dealer at the time of purchase.