An IRS retirement update:

The Internal Revenue Service (IRS) is tasked with setting the limits on retirement account contributions, deductions, and tax brackets for the entire country. Each year, the agency reassesses these numbers and provides updates based on inflation and other economic indicators.

Recently, the IRS announced there will be some changes to the 2024 tax year that could impact your retirement savings. Here’s what you need to know.

Tax brackets adjusting upward

Due to persistently high inflation, the IRS is adjusting its tax brackets. All told, brackets are moving up by 5.4% for the coming year to help account for higher inflation. This should help keep income taxes in-line with consumer buying power. The 2024 income tax brackets are as follows:

2024 federal income tax brackets

Standard deduction gets a bump

Tax filers utilizing the standard deduction can now deduct $750 more per person on their returns for 2024. This brings the standard deduction to $29,200 for married couples filing jointly, and $14,600 for single filers.

2024 standard deduction

Retirement account contributions also rise

Individual retirement account (IRA) contribution limits are also rising to $7,000, up by $500 from 2023. However, catch-up contributions for those over age 50 will remain at $8,000, in-line with the previous year.

IRA and Roth IRA contribution limits

A similar increase will be seen in workplace retirement accounts, such as a 401(k), 403(b), or 457. The IRS announced a $500 increase in the maximum contribution to $23,000. The catch-up contribution for those age 50 and older will remain the same as last year, at $7,500.

Employer-sponsored plans contribution limits

Roth IRA income limits changing

The income range for phasing out Roth IRA contributions has been raised by $8,000 for 2024 for single filers, and by $12,000 for married couples filing jointly. Contribution limits have also been raised in-line with IRA limits to $7,000.

2024 Roth IRA contribution limits and income requirements

Gifting increased below the tax

If you’re a big gift giver, you may be happy to know that you can give $1,000 more in gifts this year per person and remain under the gift tax threshold. This brings the gift tax exclusion to $18,000.

Gift tax exclusion

Understanding the implications of tax changes

The tax code is complex, and it’s always changing. This information should give you a better idea of how IRS changes for 2024 may affect you. For more detail, reach out to us directly (via your advisor or an intro call) so we can help guide through these changes, and help ensure you’re making the best tax decisions possible.

1: https://taxfoundation.org/data/all/federal/2024-tax-brackets/

2: https://www.fidelity.com/learning-center/smart-money/ira-contribution-limits

3: https://www.fidelity.com/learning-center/smart-money/roth-ira-contribution-limits

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