by Katie Benson

Let’s Talk About Annuities.com

 

As we enter 2024, it’s essential to gear up for the inevitable changes to the tax code. Although 2023 didn’t witness sweeping federal tax reforms, the IRS has made certain adjustments for the 2024 tax year that will impact income tax brackets, standard deductions, retirement contributions, and more.

If you want to optimize your retirement planning strategy, you need to understand these new tax laws to ensure /you don’t miss out on potential savings or incur unexpected liabilities.

Tax Change Basics

Changes for 2024 cover five major aspects: income tax brackets, standard deductions, retirement contribution limits, gift tax exclusion, and phase-out levels for Individual Retirement Account (IRA) deductions, Roth IRAs, and the Saver’s Credit. The annual inflation adjustments aim to prevent “bracket creep,” which happens when cost-of-living increases push taxpayers into higher brackets solely due to increased expenses.

Noteworthy 2024 Tax Changes 

Income Tax Bracket

The IRS announced adjustments to income tax brackets for the 2024 tax year. These include:

  • 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 has seen increases across filing statuses:

  • $29,200 for married couples filing jointly, up $1,500 from 2023.
  • $14,600 for single taxpayers and married individuals filing separately, an increase of $750.
  • $21,900 for heads of households, up $1,100.

Contribution Limits for Retirement Plans

For the 2024 tax year, employees can contribute up to $23,000 to 401(k), 403(b), and most 457 plans—a $500 increase from 2023. The IRA contribution limit is now $7,000, up from $6,500. The IRS designed these adjustments to encourage retirement savings and provide individuals with more opportunities to build their nest eggs.

Gift Tax Limit

The annual exclusion for gifts has increased to $18,000 for 2024, up by $1,000 from the previous year. You can now be more generous with your gifting without incurring gift tax liabilities.

Tax Credit and Deduction Changes

Various income ranges have been adjusted to determine eligibility for IRA contributions, Roth IRAs, and Saver’s Credit. Notable changes include higher income limits for deducting IRA contributions, contributing to Roth IRAs, and claiming the Saver’s Credit.

Bottom Line

Adjustments to the tax code collectively affect taxpayers across income levels. Seemingly minor revisions can have a significant impact on what you owe or the amount of your refund. To understand these changes effectively and amend your retirement plans if necessary, consider seeking guidance from a qualified tax professional or retirement planner. They can help you tailor new IRS rules to your specific financial situation and help you avoid overpaying or underpaying taxes.

Tax Planning Tips

As we move into an uncertain economy in 2024, engaging with a financial advisor or tax strategist is more critical than ever. You’ll need every advantage possible to stay on top of new regulations and current events that could potentially upend your careful planning. Use the internet to locate free retirement and tax calculation tools, along with in-depth analyses of socio-political happenings that tend to influence money decisions.

Whether you’re still working and adjusting your withholding or qualified plan contributions or you are already retired and looking to make your money last longer, having a solid tax strategy in place makes good sense.

I’m always available to discuss tax-advantaged financial tools that can help you grow your money safely and predictably. 2024 promises to be challenging, but with a properly structured blueprint in place, you’ll have a much better possibility of achieving your financial goals.

Katie@LetsTalkAboutAnnuities.com
770.525.4972