The IRS recently provided tax inflation adjustments for 2024 income, and various limit increases for IRA and 401(k) plans. Basically, your standard tax deduction has increased, as well as the contribution amounts for retirement plans and IRAs. This means you can save more for retirement and potentially reduce the amount of tax owed on income.
Let’s begin with retirement plans. Think 401(k), 457, or 403(b) plans. These are often referred to as qualified plans. As it stands now, the overall total per participant limit increases to $68,000 for 2024 when you count participant and employer contributions. That means a participant (employee) contribution limit of $23,000 and an extra $7,500 catch up contribution for those age 50 and over.
Do you have a SIMPLE IRA? Your new contribution limit for 2024 is $16,000. If you are age 50 or over, your catch up contribution remains $3,500.
For SEP IRA account holders, you need to have at least $750 in income for 2024 to participate. The maximum percentage of compensation contributable is the lesser of 25% (this is adjusted by net earnings if self-employed using a special formula) of compensation or $69,000. Your overall maximum SEP contribution for 2024 is $69,000 although likely much lower due to the “lesser of” language and percentage of compensation. The amount of compensation useable for computation in 2024 is $345,000.
Both traditional and Roth IRAs have an increased contribution limit of $7,000 for 2024. The catch up contribution for those age 50 and over remains $1,000. The Roth IRA eligibility phase-out starts at $146,000 (MAGI) for singles, and $230,000 (MAGI) for married couples. For the traditional IRA, the deductibility if covered by a workplace plan starts at $77,000 (MAGI) for singles, $123,000 (MAGI) for married filing joint, and $230,000 (MAGI) if only your spouse is covered by a qualified workplace plan.
New 2024 tax inflation updates are here as well. That is, the standard deduction has increased. The basic standard deduction has increased for those in the married filing jointly to $29,200, for singles $14,600. Head of household filers have a standard deduction of $21,900. You get an additional deduction for those 65 or older, or blind of $1,550 per each eligible spouse for the MFJ status, or $1,950 for single filers.
The top marginal rate for 2024 remains 37% for single filers with incomes over $609,350 or $731,200 for MFJ filers. Here are a few other income ranges and tax rates.
There will likely be additional changes and revisions around these items. As always, if you are not sure, check with your financial planner to confirm the latest information. As an independent Certified Financial Planner™, I can help you with these and other updates. Contact me and let’s get started! #talktometuesday #education #Hireaplanner #stressfree #IRS #401k #403b #Roth #IRA #RothIRA #Tax #TaxFiling