The Federal tax brackets are adjusted for inflation by the IRS each year. These adjustments are made to avoid putting taxpayers in higher tax brackets due to changes in the cost of living. Looking ahead to 2024, the adjustments will be less significant than those made in 2023. However, taxpayers will still experience a relatively high increase of 5.4% across all income tax brackets.
Besides income tax adjustments, there are almost 60 other notable adjustments taxpayers and savers should note. Here are some key highlights to help you navigate the upcoming changes:
Standard Tax Deduction:
The standard tax deduction is a fixed dollar amount taxpayers can deduct from their taxable income each year. Although some taxpayers prefer to itemize their deductions for a greater tax benefit, most taxpayers opt for the standard deduction. Below are the changes for the standard deductions in 2024:
|Additional (Age 65/Older or Blind)
|Married, filing jointly
|$1,550 (Each eligible spouse)
|Head of household
401k and IRA Contribution Limits:
If you are considering the benefits of different retirement plans, it is crucial to understand the contribution limits. This knowledge can help you proactively budget and manage your cash flow. Below are the 2024 contribution limits for 401(k)/Defined Contribution Plans and Traditional/Roth IRAs:
|Elective Deferral Limit
|Catch Up (Age 50+)
|Defined Contribution Plan Limit per Participant
|Traditional IRA’s and Roth IRA’s
|Catch Up (Age 50+)
*Note: See here for restrictions on deductibility of Traditional IRA contributions.
Annual Gift Tax Exclusion:
If you are considering giving gifts to individuals, such as children or relatives, it is worth noting that the annual gift exclusion has increased. This exclusion represents the amount a taxpayer can give without the need to file a gift tax return. In 2024, the limit will increase from $17,000 to $18,000 per person.
Please seek guidance from a financial planner or tax professional to better understand how these changes may impact your financial plan!
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Marshall Clay CFP, J.D., is a Partner and Senior Advisor at The Welch Group, LLC, specializing in providing Fee-Only investment management and financial advice to families throughout the United States. Marshall is a graduate of the United States Military Academy in West Point, New York, the Cumberland School of Law in Birmingham, Alabama, and is a CERTIFIED FINANCIAL PLANNER™. In addition, Marshall is a frequent guest on local television stations as an expert on various financial planning matters.
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