What's New

My quote for 2024:  'Happiness' is not a destination, it's a direction. 

529 College Savings Plan Change

The SECURE 2.0 Act, which Congress passed at the end of 2022, made a host of changes to U.S. tax law that should strengthen Americans' ability to save more money for retirement. One of these was to create a new 529-to-Roth IRA transfer option that takes effect in 2024.  It essentially enables families to convert leftover 529 funds into retirement savings in a way that allows them to avoid the penalty for non-educational withdrawals.

But there are a few rules you need to be aware of before doing this, including:

• The 529 plan must be open for a minimum of 15 years before you can do a 529-to-Roth IRA transfer.
• The beneficiary of the 529 plan must also be the owner of the Roth IRA.
• 529 plan contributions made within the last five years aren't eligible for a tax-free transfer.
• There's a lifetime maximum of $35,000 for 529-to-Roth IRA transfers.
• Normal Roth IRA annual contribution limits apply.

401(k) Contribution Limits

In 2024, the contribution limit on 401(k)s, 403(b)s, 457s, and the federal Thrift Savings Plan (TSP) will be $23,000, up from $22,500. The additional "catch-up" contribution amount for workers who will be 50 or older by Dec. 31 will remain $7,500. Thus, workers who will be 50 or older will be able to put up to $30,500 into their 401(k) plans.

There's an additional "all-in" contribution limit that is also increasing, from $66,000 to $69,000 (with an additional $7,500 for the 50-and-better crowd). That is only relevant to those whose plans allow for after-tax contributions and the mega-backdoor Roth.

IRA Contribution and Income Limits

Annual contributions limits for IRAs are increasing from $6,500 in 2023 to $7,000 in 2024. The additional catch-up contribution for investors 50 and older will remain at $1,000. However, the income limits related to the deductibility of traditional IRA contributions and the eligibility to make Roth IRA contributions have increased. 

Health Savings Accounts and Flexible Spending Accounts

The contribution limits for flexible spending accounts (FSAs) and health savings accounts (HSAs) will be higher in 2024. One exception: The "catch-up" limit on HSAs for those 55 and older remains at $1,000.

Income Tax Brackets

The amount of income necessary to move a portion of your taxable income into the next tax bracket has been adjusted upward for 2024. That "taxable income" part is important; generally, it's your gross income minus deductions. The standard deduction for single taxpayers rises to $14,600 for 2024, an increase of $750. For married couples filing jointly for tax year 2024, the standard deduction will increase to $29,200, an increase of $1,500. The head of household standard deduction will be $21,900, an increase of $750.

If you're married and 65 or older, add an additional $1,550 to the standard deduction per person in 2024. All other 65-and-older taxpayers get an additional $1,950 standard deduction.

Gifts, Estates, and QCDs

• The annual exclusion for gifts increases to $18,000 per recipient for 2024, up from $17,000. Note that if you make a gift above that amount, it doesn't necessarily mean that you'll owe taxes. Rather, you report the amount on Form 709, and your lifetime unified gift and estate exemption amount is reduced.
• As for the estate exemption, it will increase to $13.61 million per person, up from $12.92 million for estates of people who died in 2023. Note that it will be reduced by approximately half in 2026, according to current law.
• The annual limit for qualified charitable distributions (QCDs) from traditional IRAs will increase by $5,000 to $105,000 per person in 2024. As before, this is only available to taxpayers age 70-1/2 or older.

Social Security and Medicare

• Multiple figures related to Social Security will be higher in 2024:
• Beneficiaries will see a 3.2% increase in their Social Security checks next year, increasing the average monthly benefit from $1,827 in 2023 to $1,906.
• The maximum a retiree can receive at full retirement age will be $3,822 per month, up from $3,627 per month in 2023.
• The maximum amount of income subject to the 6.2% Social Security tax will increase from $160,000 in 2023 to $168,600 in 2024.
• Finally, the monthly premiums for Medicare Part B are going up. The amount is based on the modified adjusted gross income reported on the tax return from two years prior. So the premiums beneficiaries will pay in 2024 are determined by their 2022 tax returns. Higher-income beneficiaries may also pay an additional income-related monthly adjustment amount (IRMAA) for Part D coverage.

Medicare Part B Premium and Part D IRMAA Brackets

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.