Broker Check

New 2024 IRA adjustments

December 04, 2023

The IRS recently announced some changes for the 2024 tax year.  This won’t be the most exciting blog but important nonetheless, particularly as it relates to your retirement planning.

 Retirement Plans

  • The 401K, 403B and 457 plans all will see a $500 allowable increase to bring your total contribution to $23,000. There is no change to the “catch up” contribution which remains at $7,500.  So, for those of you 50 and above you can defer up to $30,500 in 2024.  Be sure to make your adjustments on your percentage of deferments each paycheck.
  • ROTH and Traditional IRA contribution limits are also up $500 in 2024 for a total allowable deferment of $7,000. Additionally, traditional IRAs allow a $1,000 “catch up” contribution for those 50 and above bringing you to a total of $8,000.  I’ll be reaching out to those of you whom this may affect to see if you would like to change your contributions.
  • One additional note on the ROTH IRA is that income phase-out limits increased by $8,000 for single filers and head of household ($146,000-$161,000). Married couples will see an increase in phase-out limits of $12,000 ($230,000-$240,000).  It’s important to note that if you are still above these limits you have the ability to do ROTH conversions of your existing IRA’s (“back door ROTH”), however, there are potential income tax consequences as any amount converted is considered ordinary income for that year.

Tax Filings

  • The standard deduction has increased to $29,200 for married couples filing jointly, up $1,500 from last year. For single filers the deduction is up $750 to $14,600.  If you are a W-2 employee and don’t itemize, this is a nice increase on the deduction.
  • Gift tax exclusions are up $1,000 to $18,000. People often worry that lending money to a friend or family member will cause a tax problem.  This is a pretty sizeable exclusion.  Also, multiple family members can utilize this exclusion.  For example, if parents want to help a child with a home purchase, both the husband and wife could gift $18,000 each for a total of $36,000.
  • Tax brackets have been indexed upwards by 5.4% for 2024 in an effort to keep pace with inflation. This means that you may be able to earn more money in 2024 yet remain in the same brackets as 2023.  This could be another good reason to consider a ROTH conversion next year if you expect your income to remain the same.

As always, please reach out with any questions, and feel free to share this with anyone you think could benefit.