Changes to Tax Laws
February 1, 2024
Rarely does a year go by without changes to the federal tax code and 2024 is no exception. It is important to stay up to date on tweaks to the process with each passing year to put yourself in the best position to help maximize your return or help minimize a tax bill. There are also plenty of new regulations that may directly impact those who are saving for, or have already entered into, retirement.
Following are some of the changes most significant for those plotting their future finances:
Higher Tax Brackets
Continued rises in inflation have led to increased income limits for the purpose of structuring tax brackets. This will affect thresholds for both income and capital gains taxes. These higher thresholds could allow for more opportunities to sell appreciated securities without incurring any capital gains taxes. For 2024, the 0% capital gains tax rate applies to single filers earning less than $47,025 and married couples filing jointly with incomes of less than $94,050.1
No Required Minimum Distributions on Roth 401(k)
With additional regulations contained within the SECURE 2.0 Act of 2022 activating for the first time in 2024, one significant new development is that Roth 401(k) accounts will no longer be subject to required minimum distributions. This will allow those with current Roth 401(k) plans to continue with their current path and they will not need to roll those assets into a Roth IRA upon retirement.
Higher Contribution Limits
Company retirement plan contributions are increasing to $23,000 for people under age 50. The limit is also increasing to $30,500 for those who are over the age of 50. Meanwhile, IRA limits are rising to $7,000 for people under 50 and $8,000 for savers who are 50-plus. Contributions to health savings accounts, which can be employed as stealth retirement accounts, are increasing as well.2
This is a great time to review your company retirement plan and/or HSA contributions and consider maxing out your contributions. Also, you may want to explore any employer-matching contributions that you are eligible to receive.
Make It Make Sense
Taxes can be complicated, and the questions can pile up fast. If you would like to feel more confident, please reach out to our seasoned professionals and schedule a complimentary consultation.
We are happy to help!