New Tax & Contribution limits for 2024

Financial,

financial planning

The New Year is upon us and many of us take this time to lay out our financial plan for the upcoming year.  There are some important changes to tax rules and limits that you should be aware of that may affect your planning.  We’ve outlined them here to help you create your best plan:

Here is a general overview for 2024:

Retirement Plan limits

401(k) Plans
  • The contribution limit has been increased to $23,000. (Up from $22,500 in 2023.) This contribution limit also applies to most 457 plans and 403(b)s.
  • For those over age 50, the catch up contribution limit remains unchanged at $7,500 (same as in 2023).
Individual IRAs

While the over 50 catch-up limit is not being changed for IRAs, the annual contribution limit for 2024 is being increased to $7,000 (up from $6,500 in 2023).

 

Health Saving Account (HSA) Limits

  • For 2024, the maximum annual contribution amount is $4,150 (up from $3,850 in 2023).
  • For families the amount is $8,300 per year (up from $7,750 in 2023).
  • The catch-up contribution amount for those age 55 or older remains at $1,000 per year.

 

Tax Brackets Changes for 2024

America’s income tax rates are staying the same. But the tax bracket and the income buckets that are used to calculate the tax are increasing to our benefit.

Remember, your highest tax bracket doesn’t reflect how much you pay in federal income taxes. If you’re a single filer in the 22 percent tax bracket for 2024, you won’t pay 22 percent on all your taxable income. You will pay 10 percent on taxable income up to $11,600, 12 percent on the amount from $11,600 to $47,150, and 22 percent above that (up to $100,525).

Tax brackets for income earned in 2024
  • 37% for incomes over $609,350 ($731,200 for married couples filing jointly)                     – Up from $578,125 and $693,750 respectively
  • 35% for incomes over $243,725 ($487,450 for married couples filing jointly)                    – Up from $231,250 and $462,500
  • 32% for incomes over $191,950 ($383,900 for married couples filing jointly)                    – Up from $182,100 and $364,200
  • 24% for incomes over $100,525 ($201,050 for married couples filing jointly)                      – Up from $95,375 and $190,750
  • 22% for incomes over $47,150 ($94,300 for married couples filing jointly)                         – Up from $44,725 and $89,450
  • 12% for incomes over $11,600 ($23,200 for married couples filing jointly)                         – Up from $11,000 and $22,000
  • 10% for incomes of $11,600 or less ($23,200 for married couples filing jointly)                 – Up from $11,000 and $22,000

Married filing separately pay at same rate as unmarried. Source: Internal Revenue Service

 

Increased Standard Deduction for 2024

The taxpayers Standard Deduction is the amount of income exempt from income taxes.

  • The standard deduction will rise to $14,600 for single filers.  Up from $13,850 in 2023.
  • The standard deduction for couples filing jointly will rise to $29,200, up from $27,700 in the 2023 tax year.
  • The Head of Household deduction will rise to $21,900.
  • Single filers age 65 and older (who are not a surviving spouse) can increase the standard deduction by $1,950.
  • Each joint filer 65 and over can increase the standard deduction by $1,550 each, for a total of $3,100 if both joint filers are 65+.

 

Earnings limits, Cost of Living Increase (COLA) for Social Security and Supplemental Security Income (SSI) benefits

Approximately 71 million Americans will see an increase of 3.2 percent in 2024.

The 3.2 percent cost-of-living adjustment will begin with benefits payable to more than 66 million Social Security beneficiaries in January 2024. Increased payments to more than 7.5 million SSI beneficiaries will begin on December 29, 2023.

For those Americans working while receiving Social Security Benefits, the earnings limit for workers who are younger than “full” retirement age will increase to $22,320. (SS deducts $1 from benefits for each $2 earned over $22,320.)

The earnings limit for people reaching their “full” retirement age in 2024 will increase to $59,520. (SS deducts $1 from benefits for each $3 earned over $59,520 until the month the worker turns “full” retirement age.)

There is no limit on earnings for workers who are “full” retirement age or older for the entire year.

Medicare Changes

There are 2 changes to be aware of for 2024.

  • Medicare beneficiaries will pay higher Part B premiums. The premium for Part B will increase by $10 to $174.70.
  • The annual deductible will also decrease from $226 to $240 for 2024.

 

Even with inflation and the current high costs of living, these changes are put in place to help.  So make sure to do your planning and know of these extra limits available to you!