Helpful miscellaneous articles
regarding our retirement plan and planning.
Like you, I review my retirement nestegg and plan from time to
time. Recently, I went though some continued
education for some credentials I maintain and it occurred to me that we all
could use a review about these issues.
So with your help, we will share and post articles and info that may be
helpful and of interest to many of you in this section.
My personal thoughts have turned to taxes and am preparing my 2023
return as we speak but 2024 is shaping up to have a number of changes that will
affect us all so here is an article that highlights those changes for knowledge
and planning.
2024 IRS Tax Changes: What
You Need to Know
Published on December 27,
2023
Written by Mark Henricks
Edited by Arturo Conde, CEPF®
Reviewed by Michele Cagan, CPA
SHARE
The
new year brings new tax brackets, deductions, and limits that will impact your
2024 federal income tax return. While 2023 did not see major federal tax reform
legislation, the IRS has adjusted ranges for tax brackets, standard deductions,
retirement savings contributions and more to account for inflation. These 2024
IRS tax code tweaks affect taxpayers across income levels and will change how
much you owe or your refund amount. Understanding the latest IRS adjustments
will allow you to update your withholding and take advantage of any new breaks.
A financial
advisor can help you stay up to date on the latest in tax rules and
regulations.
Tax Change Basics
The
five major 2024 tax changes cover income
tax brackets, the standard deduction, retirement
contribution limits, the gift
tax exclusion and phase-out levels for Individual Retirement
Account (IRA) deductions, Roth
IRAs and the Saver’s
Credit. This annual inflation adjustment ensures that taxpayers aren’t
bumped into higher brackets due to cost-of-living increases rather than pay
raises.
While
many adjustments are relatively minor, even small tweaks can add up to
substantial savings or higher bills. For example, an upper-middle class couple
could bank over $1,000 more by making the most of increased 401(k)
contributions and shifting IRA deductibility planning.
2024 Tax Changes You Need to Know
Here
are brief descriptions of the major 2024 tax updates affecting taxpayers:
Income Tax Bracket
There
income brackets for marginal tax rates were adjusted to reflect inflation for
2024 returns. Here’s how they shake out:
·
37% for individual taxpayers
with incomes over $609,350, and $731,200 for married couples filing jointly
·
35% for individual taxpayer
incomes over $243,725, and $487,450 for married couples filing jointly
·
32% for individual taxpayer
incomes over $191,950, and $383,900 for married couples filing jointly
·
24% for individual taxpayer
incomes over $100,525, and $201,050 for married couples filing jointly
·
22% for individual taxpayer
incomes over $47,150, and $94,300 for married couples filing jointly
·
12% for individual taxpayer incomes
over $11,600, and $23,200 for married couples filing jointly
·
10% for individual taxpayer
incomes of $11,600 or less, and $23,200 or less for married couples filing
jointly
Standard Tax Deduction
The
standard deduction rose $1,500 from 2023 to $29,200 for married couples filing
jointly. Single taxpayers and married individuals filing separately can take a
standard deduction of $14,600, an increase of $750. Heads of households get a
$21,900 standard deduction, up $1,100.
Contribution Limits for Retirement Plans
The
most an employee can contribute to a 401(k) plan in 2024 will be $23,000, a
$500 increase from 2023. This limit also applies to 403(b) and most 457 plans,
as well as the Thrift Savings plan for federal employees. For people with
Individual Retirement Accounts, the limit was raised to $7,000 from $6,500. The
IRA catch-up contribution limits to retirement plans for people aged 50 and
over were not changed.
Gift Tax Limit
The
amount of the annual exclusion for gifts rises $1,000 for 2024, from $17,000 to
$18,000.
Tax Credit and Deduction Changes
In
2024, mostly higher income ranges will be used to determine a taxpayer’s
eligibility to deduct IRA contributions, contribute to Roth IRAs and claim the
Saver’s Credit. Here are details:
Ranges
for phasing out IRA contribution deductibility apply based on filing status and
whether the taxpayer or a spouse is covered by a workplace retirement plan as
follows:
|
Filing status and coverage |
Phase-out Range |
Change |
|
Single taxpayer covered by workplace retirement plan |
$77,000 and $87,000 |
Up from $73,000 and $83,000 |
|
Married people filing jointly covered by workplace retirement
plans |
$123,000 and $143,000 |
Up from $116,000 and $136,000 |
|
Single taxpayer not covered by workplace retirement plan but
married to someone who is covered |
$230,000 and $240,000 |
Up from $218,000 and $228,000 |
|
Married filing separately not covered by a plan |
$0 and $10,000 |
No change |
Roth
IRA contributions are also subject to income-based phase-outs and most of those
ranges increased in 2024 as well. Phase-out ranges vary based on filing status
as follows:
|
Filing status |
Phase-out
Range |
Change |
|
Single and head of household |
$146,000 and $161,000 |
Up from $138,000 and $153,000 |
|
Married filing jointly |
$230,000 and $240,000 |
Up from $218,000 and $228,000 |
|
Married filing separately |
$0 and $1,000 |
No change. |
The
income limit for the Saver’s Credit is based on based on filing status and is
adjusted as follows:
|
Filing status |
Income limit |
Change |
|
Single and married filing separately |
$38,250 |
Up from $36,500 |
|
Married filing jointly |
$76,500 |
Up from $73,000 |
|
Head of household |
$57,375 |
Up from $54,750 |
Bottom Line
The
2024 tax adjustments made by the IRS to income tax brackets, the standard
deduction, retirement savings limits, and phase-outs will collectively impact
taxpayers across income levels. While many of the specific changes are
relatively small inflation adjustments, they add up to real impacts on your tax
bill or refund. As with every tax year, it pays to be aware of any changes that
are relevant to your specific tax scenario.
Tax Planning Tips
·
Meeting with a financial advisor can
help you apply the new 2024 IRS tax rules to your personal finance and tax
planning picture. SmartAsset’s free tool matches
you with up to three vetted financial advisors who serve your area, and you
can have a free introductory call with your advisor matches to decide
which one you feel is right for you. If you’re ready to find an advisor who can
help you achieve your financial goals, get started now.
·
SmartAsset’s Federal income tax
calculator is updated with each year’s changes
in time for you to file your next return.
(As with any of these informative articles,
anyone who needs someone to talk to about
No comments:
Post a Comment