What's New for 2024: Social Security, Retirement Savings, Taxes, Deductions & Gifting
Every year we publish a summary of the changes going into effect in the coming year that may affect your income, taxes, and savings. While there are positive upward adjustments across the board for all categories, the changes for 2024 are more moderate than the previous year, reflecting that we have turned a corner with a significant reduction in inflation.
Below is a list of 2024 provisions that may be relevant to you. You can click on each link for more details:
1. 2024 Social Security Benefits Increase by 3.2%
2. 2024 Retirement Savings Limits Increase for 401(k)s and IRAs
3. 2024 IRA Income Limits Adjust Upward
4. 2024 Tax Bracket Income Ranges Increase
5. 2024 Standard Tax Deductions Increase
6. 2024 Long-Term Capital Gains Tax Rate Thresholds Increase
1 . 2024 Social Security Benefits Increase by 3.2%
In 2024, 72 million social security beneficiaries will receive a significant 3.2% bump up in monthly benefits. This is a smaller increase than the historic 8.7% increase in 2023. The cost-of-living adjustment (COLA) is intended to help retiree incomes keep up with inflation. So, while certainly helpful, it can be considered more of a catch-up payment than an income boost.
The average retired worker will see their monthly check rise by $49 to $1,907..
As is typical, the maximum amount of earnings subject to the payroll tax is also increasing by 5% from $160,200 to $168,600. Earnings above that are not subject to social security taxes.
2. 2024 Retirement Savings Limits Increase for 401(k)s and IRAs
The IRS announced a moderate increase of $500 to contribution limits for workplace retirement plans and individual retirement accounts (IRAs). Contribution limits for traditional and Roth IRAs are also getting a boost.
The changes are as follows:
3. 2024 IRA Income Limits Adjust Upward
The income limits governing eligibility for Roth IRAs and deductibility for traditional IRAs also saw moderate upward adjustments for 2024.
They are as follows:
4. 2024 Tax Bracket Income Ranges Increase
The IRS has adjusted the income limits for each tax bracket based on inflation.
The new income bands are as follows:
Head of Household is defined as someone who is unmarried and provides housing and financial support (at least half) for a child, parent, or other relative who lives with them for 6+ months in a year.
5. 2024 Standard Tax Deductions Increase
The standard deduction is a defined amount the IRS allows taxpayers to subtract from their taxable income. Some people find it makes sense to take the standardized deduction instead of itemizing deductions, based on the higher value of the standard deduction.
In 2024, standard deductions are increasing over 5%.
To be eligible for the age-based additional standard deduction, you must turn 65 by the end of the tax year.
Head of Household is defined as someone who is unmarried and provides housing and financial support (at least half) for a child, parent, or other relative who lives with them for 6+ months in a year.
NOTE: If you are being claimed as a dependent on another person's tax return, your 2024 standard deduction is limited to the greater of $1,300 or your earned income plus $450 (the total can't be more than the basic standard deduction for your filing status).
6. 2024 Long-Term Capital Gains Tax Rate Thresholds Increase
The IRS adjusted the taxable income brackets that determine the amount of capital gains taxes investors pay on profits made from the sale of stocks, mutual funds, or other capital assets held for more than a year.
Head of Household is defined as someone who is unmarried and provides housing and financial support (at least half) for a child, parent, or other relative who lives with them for 6+ months in a year.
7. 2023 Annual Gift Tax Exclusion Increases
The annual gift exclusion amount than any individual can gift another without filing a gift tax return is increasing from $17,000 (2023) to $18,000 in 2024. Spouses can both gift $18,000 to an individual, doubling the overall gift.
The gift exclusion is especially relevant to 529 college savings contributions; each parent (or grandparent) can contribute up to $18,000 to an individual child. Direct payments for medical or education expenses can be unlimited.
8. 2024 Lifetime Estate and Gift Tax Exemption Increases
The lifetime estate and gift tax exemption is increasing in 2024 to $13.61 million per individual (up from $12.92 million in 2023). The amount is double for a married couple. This provision is currently set to expire at the end of 2025, at which time (unless extended) the exemption will decrease significantly to $7 million. Wealthy individuals concerned about future exemption limits being retracted may want to initiate a proactive gifting strategy now.
Any opinions in this newsletter are those of Estes Wealth Strategies and John Estes and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information presented herein has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete. It is not a statement of all available data necessary for making a recommendation, nor does it constitute a recommendation.
Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.
While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.