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Statera Team
The Internal Revenue Service has recently updated the tax brackets, standard deductions, and limits on retirement contributions for the 2024 tax year. It’s recommended to consider these changes early, even though these taxes aren’t due for some time. A total of over 60 provisions have been modified but highlighted here just a few key changes in tax brackets and retirement contribution limits.
Adjustments to Tax Brackets for Inflation
For 2024, tax brackets have adjusted upwards of 5.4% with the top tax bracket remaining at 37%. This change aims to reflect inflation, measured by the Consumer Price Index. This adjustment helps align income taxes with the evolving purchasing power of consumers.1
Changes in Standard Deduction
The standard deduction for married couples filing jointly has risen to $29,200, which is an increase of $1,500 from 2023. For single filers, the standard deduction rises to $14,600, up by $750.2
Updates on Individual Retirement Accounts (IRAs)
The IRA contribution limits will increase by $500 for 2024, to $7,000. The additional catch-up contribution limit for individuals 50 and over remains at $1,000, making their total contribution limit $8,000.2
Roth IRA Contribution Limits
For Roth IRAs, the income phase-out range increased for single filers and heads of household by $8,000, to between $146,000 and $161,000. For married couples filing jointly, the phase-out range increased to $230,000 to $240,000, up $12,000. The phase-out range for married individuals filing separately remains unchanged at $0-10,000.2
Enhancements in Workplace Retirement Accounts
The maximum contribution amounts for 401(k), 403(b), and 457 plans, along with similar accounts, will rise by $500 in 2024, totaling $23,000. The catch-up contribution limit for individuals aged 50 and above continues to by $7,500, making their total limit $30,500.2
Adjustment in Gift Tax
The annual gift tax exclusion has increased by $1,000 for 2024 to $18,000.2
Preparing for changes
These adjustments, mainly aimed at accounting for inflation, affect various aspects of tax planning, from individual retirement accounts to gift taxes and more. It’s important to consider the changes that will impact your specific financial situation and consider these impacts in advance. Remember that this information is provided for informational purposes only. For more detailed advice and a better understanding of how these changes might impact you, consulting with your tax professional is recommended. You can also contact your financial advisor for more information about how tax changes may impact your overall financial plan.
Sources:
1- Fidelity.com, Nov. 2023
2- IRS.gov, Nov. 2023
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