Changes are coming. This is part one of a four part series that will provide all of the tax changes for 2024. Let’s get started;
There are lots of tax changes for 2024. Some reflect prior-year inflation. Others are new rules. But one thing is certain…all taxpayers are affected.
Start with key provisions in SECURE 2.0… the 2022 law to bolster retirement savings. It has over 90 provisions with different effective dates. Among the changes that take effect this year: More penalty-free early withdrawals by people under age 59½ from IRAs and 401(k)s. Up to $10,000 for domestic abuse victims and $1,000 for emergencies can be taken without paying the 10% additional tax.
Funds in 529 education accounts can be rolled over tax-free to a Roth IRA. There is a $35,000 lifetime cap. Rollover amounts can’t exceed the annual payin limit for Roth IRAs. And the 529 account must have been open for more than 15 years.
Roth 401(k) owners no longer need to take required minimum distributions. Plan sponsors can create emergency savings accounts for participants, who could then make Roth payins (on an after-tax basis) to that savings account within the plan. A participant’s account balance can’t exceed $2,500.
The qualified charitable distribution cap is indexed for inflation, so that IRA owners 70½ and older can transfer up to $105,000 in 2024 from their IRAs directly to charity without having to pay tax on the withdrawal.
Plus these: The employer contribution limits for SIMPLEs increase. Employers with no existing retirement plans can offer starter 401(k) accounts with default automatic enrollment (with a payin cap the same as that for IRAs). Additionally, student loan relief can be offered through workplace retirement plans.
Key Dollar on workplace retirement plans and IRAs increase for 2024. The maximum 401(k) contribution is $23,000. People born before 1975 can contribute an extra $7,500. These limits also apply to 403(b)s and 457 plans. SIMPLEs have a $16,000 cap, plus $3,500 for individuals age 50 and older. The 2024 contribution cap for traditional IRAs and Roth IRAs is $7,000, plus $1,000 as an additional catch-up contribution for individuals age 50 and older. The income ceilings on Roth IRA payins are higher. Contributions phase out at AGIs of $230,000 to $240,000 for couples and $146,000 to $161,000 for singles. 2024 deduction phaseouts for traditional IRAs range from AGIs of $123,000 to $143,000 for couples covered by 401(k)s and $77,000 to $87,000 for singles and household heads. If only one spouse is covered by the plan, the phaseout range for deducting payins for the uncovered spouse is $230,000 to $240,000.
Stay tuned for more changes coming your way.