Tax Tips: Your 2024 Financial Planning Guide

As we step into the end of the first quarter of 2024, it’s essential to stay informed about the latest changes in IRS rules that impact your financial planning.

For the 2024 tax year, several key adjustments have been made to contribution limits for qualified retirement plans like 401(k) and 403(b), as well as income limits for Roth IRA contributions. Additionally, the Social Security wage cap and tax brackets have seen alterations compared to last year.

Here’s a rundown of everything you need to know to plan your financial year:

401(k) Contribution Limits

For 2024, the annual employee contribution limit for 401(k) plans has increased to $23,000, up from $22,500 in 2023.

For those aged 50 and older, the catch-up contribution limit remains the same at an additional $7,500, bringing the total employee contribution limit to $30,500.

Roth and Traditional IRA Limits

Individuals can make full Roth IRA contributions if their adjusted gross income (AGI) is below a certain threshold. Additionally, the amount you can directly contribute is phased out after a certain AGI level. There is no income limit for contributing to a traditional IRA. Below are the 2024 income thresholds:

For Single Filers and Heads of Household:?The income limit to make full contributions to a Roth IRA in 2024 is $161,000, an increase from $146,000 in 2023.

For Married Couples Filing Jointly:?The income limit for full Roth IRA contributions for couples in 2024 is $240,000, up from $230,000 last year.

The contribution limit for both Roth and traditional IRAs is $7,000 in 2024, up from $6,500. However, for those over 50 the limit is $8,000, up from $7,500 in 2023.? The extra $1,000 is called the “catch-up” provision.

There are special rules for who can contribute to a Roth IRA based on income.

Once a single filer’s modified gross income exceeds $146,000 and joint filers’ combined income exceeds $230,000, the amount they can contribute to a Roth IRA falls incrementally depending on their income. For example, if a single filer’s income exceeds $146,000, but is less than $147,500, the maximum they can contribute is $6,300 in 2024.

Social Security Wage Cap

The Social Security Administration has increased the wage cap for 2024 to $168,600, up from $160,200.

This means that individuals earning up to $168,600 will continue to pay Social Security taxes, while any income above this threshold will not be subject to Social Security taxation.

Income Tax Brackets

The IRS has also adjusted the income tax brackets for 2024 to adjust for inflation. The new tax brackets are as follows:

• 10% for individual taxable incomes of $11,600 or less, and $23,200 or less for married couples filing jointly.
• 12% for individual taxable incomes over $11,600, and over $23,200 for joint filers.
• 22% for individual taxable incomes over $47,150, and $94,300 for joint filers.
• 24% for individual taxable incomes over $100,525, and $201,050 for joint filers.
• 32% for individual taxable incomes over $191,950, and $383,900 for joint filers.
• 35% for individual taxable incomes over $243,725, and $487,450 for joint filers.
• 37% for individual taxable incomes over $609,350, and $731,200 for joint filers.

Standard Tax Deduction

The 2024 standard deduction has increased too. Single filers can claim $14,600 (up from $13,850) and those married, filing jointly can claim $29,200 (up from $27,700).

Since We Are IN 2023 Tax Time, See My 5 Online Tax Return Tips:

1. Consider Setting Up an Online Account: The IRS clearly wants Americans to set up online accounts at www.IRS.gov. The accounts are FREE!
2. Benefits to Setting Up an Online Account with the IRS: Account holders can quickly check balance dues, payment options, and filing history and one can file an income tax extension without speaking to a human.
3. Instead of Calling the IRS: The IRS has setup a new AI-powered online tax assistant that can interact with account holders and answer questions, such as, Do I qualify for tax credits or deductions?
4. New Online Tax Filing Service “Pilot Program” Launched by the IRS: In 12 states, (NOT NYS yet) the IRS has launched a program allowing account holders to file taxes directly with the IRS for no charge.? Should this program be rolled out nationally, it will be in direct competition with the “Turbo taxes” and “H&R Block’s” of the world.
5. Where’s My Refund Tool: The IRS projects refunds will average 10% more from 2023 (almost $3500 each) due to raised tax brackets (see above) due to inflation.? A faster way to obtain your refund would be by using this new tool!