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IRS 2024 Tax Brackets and Retirement Contribution Limits

IRS 2024 Tax Brackets and Retirement Contribution Limits

November 15, 2023

With the 2024 tax year on the horizon, it's never too early to start thinking about your taxes. The Internal Revenue Service (IRS) recently released updated income tax brackets, standard deductions, and retirement contribution limits for the upcoming year. While these changes may seem far away, planning ahead can help you make strategic financial decisions that will benefit you come April.

Overall, more than 60 provisions have changed. Here are a few of the most critical tax bracket and retirement contribution limit changes.

Tax Bracket Inflation Adjustment

Overall, tax brackets have been adjusted upwards by 5.4% for 2024. The primary purpose of this adjustment is to account for inflation, which is based on the Consumer Price Index. The government’s goal is to keep income taxes in sync with consumer buying power. Consequently, the percentage of your income that is taxable may be different due to these changes. This could affect your overall tax liability, so it's essential to familiarize yourself with any potential changes in your bracket.

Standard Deduction

The standard deduction has increased to $29,200 for married couples filing jointly, up $1,500 from the previous year. For single filers, this number increased by $750 to $14,600. This change will result in a higher deduction for many taxpayers, which could potentially lower your tax bill. It's important to note that some individuals may opt to itemize deductions instead of taking the standard deduction. If you are unsure which option is best for you, give us a call at 614-408-0004.

Individual Retirement Accounts (IRAs)

IRA contribution limits are up $500 in 2024 to $7,000. Catch-up contributions for those over age 50 remained at $1,000, bringing the total limit to $8,000. This change allows individuals to contribute more pre-tax dollars towards their retirement. If you are not currently contributing to an IRA, now may be a good time to consider opening one and taking advantage of these increased limits.

Roth IRAs

The income phase-out range for Roth IRA contributions increased by $8,000 to $146,000-$161,000 for single filers and heads of household. For married couples filing jointly, phase-out will be $230,000 to $240,000 (a $12,000 increase). Married individuals filing separately see their phase-out range remain at $0-10,000. If you were previously unable to contribute to a Roth IRA due to income limitations, this may be your opportunity.

Workplace Retirement Accounts

Those with 401(k), 403(b), 457 plans, and similar accounts will see a $500 increase for 2024, bringing the total maximum contribution amounts to $23,000. The catch-up contribution for those aged 50 and older remains at $7,500, bringing their total limit to $30,500. This increase allows individuals to save even more towards their retirement, potentially reducing their taxable income.

Gift Tax

The annual gift tax exclusion is now $18,000 for 2024, an increase of $1,000 from the previous year. This means you can make gifts of up to $18,000 to an individual without it being subject to the gift tax. If you are considering making a large financial gift, this increase may allow you to do so without incurring any taxes.

In conclusion, with the new year comes changes to tax brackets and retirement contributions that could impact your finances. It's important to start planning early and consider how these changes may affect your tax liability. If you have any questions or concerns, it's always best to consult with a financial advisor or tax professional for personalized advice. You can contact our office at 614-408-0004 and we can provide more information about the pending changes.