Optimize Your 2024 Tax Strategy: Important Numbers to Know
The 2023 tax season isn’t just about wrapping up another year’s finances. It’s an opportunity to prepare for the future, specifically for the 2024 fiscal year. Here’s a look at some key tax and retirement numbers to help you prepare for the 2024 tax year.
Tax Brackets Adjusted for Inflation
The IRS has adjusted the tax brackets for 2024, accounting for inflation. These changes are critical for tax planning as they directly impact how much you’ll owe come tax time.
The 2024 tax brackets are:
Source: Tax Foundation, “2024 Tax Brackets,” 9 November 2023, https://taxfoundation.org/data/all/federal/2024-tax-brackets/.
Meanwhile, the standard deduction numbers are:
Source: Tax Foundation, “2024 Tax Brackets,” 9 November 2023, https://taxfoundation.org/data/all/federal/2024-tax-brackets/.
Increased Retirement Savings Limits
For 2024, you can save more in various retirement accounts, including:
401(k), 403(b), most 457 plans, and the Thrift Savings Plan: The contribution limit has seen a rise to $23,000, up from $22,500 in 2023. If you’re 50 or older, you can contribute an additional $7,500. This increase allows you to save more while potentially reducing your taxable income and bolstering your retirement nest egg.
Individual retirement accounts (IRAs): The contribution limit for traditional and Roth IRAs has been adjusted to $7,000, up from the previous limit of $6,500. The catch-up contribution if you’re over age 50 is an additional $1,000.
Your ability to deduct your traditional IRAs phases out as your income climbs. Here’s what you need to know for 2024:
Single taxpayer covered by a workplace retirement plan: The phaseout range is $77,000 to $87,000.
Married couples filing jointly; the spouse making the IRA contribution is covered by a workplace retirement plan: The phaseout range is $123,000 to $143,000.
Married couples filing jointly, where the IRA contributor is not covered but the spouse is: The phaseout range is $230,000 to $240,000.
In addition, your ability to contribute to a Roth phases out as your income climbs:
Singles and heads of household: The phaseout range is $146,000 to $161,000.
Married couples filing jointly: The phaseout range is $230,000 to $240,000.
Health Savings Accounts
You can contribute more to an HSA in 2024.
For self-only HSAs, you can contribute up to $4,150, a 7.8% increase over 2023. The family contribution limit is $8,300, a 7.1% increase over 2023.
If you are 55 or older, you can contribute an additional $1,000 to your HSA.
Interested in learning how to use your health savings account as part of your retirement planning? Read our blog “Using an HSA as a Retirement Savings Strategy.”
Gift Taxes
The federal gift tax exclusion for individuals has increased $1,000 over 2023 to $18,000. For married couples, the combined limit is $36,000. The exclusion allows you to give up to this amount per recipient without filing a gift tax return.
The lifetime estate tax exemption has increased in 2024 as well: from $12.92 million in 2023 to $13.61 million this year.
RMDs for Surviving Spouses
If you are a surviving spouse, a new rule under the Secure Act 2.0 takes effect in 2024 that could lower your required minimum distribution (RMD) and, thus, taxes.
You can now wait until your deceased spouse would have been required to take RMDs. You can also use the Uniform Lifetime Table rather than the Single Life Expectancy Table.
Final Thoughts
Given these updates, there can be an advantage to maximizing your contributions to retirement accounts and potentially your health savings account. Not only does this strategy support your long-term financial goals, but it can also offer immediate tax benefits by potentially lowering your taxable income for 2024.
As you file your 2023 tax returns and look to the year ahead, assess your deductions, contributions, and investments to help maximize your savings and minimize your liabilities. Consider working with a tax-focused financial advisor who provides fiduciary advice. By offering personalized advice, they can help you identify and capitalize on opportunities tailored to your financial situation.
Schedule a complimentary, 15-minute chat with a fee-only, fiduciary financial advisor today to discuss your personal situation.
This material was written in collaboration with artificial intelligence (ChatGPT) derived from sources believed to be accurate. This information should not be construed as investment, tax, or legal advice.
Parkshore Wealth Management is a family-owned, independent, fee-only Registered Investment Advisor with offices in Granite Bay and Folsom, CA, and Lehi and Logan, UT. We partner with financially responsible individuals and families who are eager to take positive steps that will allow them to use their money to build the life they desire. The firm is led by Harold Anderson, CFP®, and Daniel Andersen, CFP®, both members of NAPFA, the country’s leading professional association of fee-only financial advisors.