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2024 Tax Changes: What’s New?

As dual-focused CPAs and financial advisors, we relish the opportunity to not only grow your assets but save you on taxes. And for your 2024 taxes, there are ample opportunities to reduce your tax obligation so we can help you grow your savings faster. In this article, we’ll review some notable standouts, suggest what to do with those funds, and help ensure you’re well-equipped to make informed decisions that will benefit your long-term financial health. 

Higher Standard Deductions

The standard deduction is the amount you can subtract from your income before applying your income tax if you aren’t itemizing your tax return. In 2024, the standard deduction is up across the board, meaning you’re more likely to get bumped down a tax bracket while having a reduced overall tax burden. For example, if your salary is $100,000 and you’re a single filer, only $84,400 of your salary would be subject to tax if you claim the standard deduction. 

In 2025, when you file your 2024 taxes as either a single filer or married filing separately, you’ll be able to deduct an additional $750. If you’re married and filing jointly, you’ll be able to deduct an additional $1,500. Finally, if you’re filing as a Head of Household, your deduction goes up an additional $1,100 from the 2023 deduction limits.

2023 standard deduction table

However, if you are itemizing your deductions, these higher standard deductions won’t affect your tax situation. And you’re most likely itemizing your deductions because the total amount you deduct would be greater than the standard deduction. If you’re unsure which route is the best for you, we recommend sitting down with a CPA for clear guidance. 

Income Bracket Changes

There is now a higher earning threshold for each tax bracket, again meaning a reduced tax burden. For example, if you earned $185,000 in 2023, your tax bracket was 32% – in 2024, you’ll only be in the 24% bracket. That’s quite a difference!  

The additional income required in 2024 to reach the threshold for each tax bracket can be seen in the tables below:

2023 Income Brackets

2024 Income Brackets

The increased standard deduction combined with higher tax bracket thresholds means significant tax savings – savings that could go to an emergency fund, paying off debt, or, our personal favorite, investing. 

Retirement Plan Contribution Limit Changes

Speaking of investing, you can further reduce your taxable salary via higher Traditional IRA and 401(K) contribution limits. 

The contribution limit for 401(K) retirement plans goes up to $23,000, up from $22,500. The limit on annual contributions to an IRA also increases to $7,000, up from $6,500.

If you have a 401(K), you may face phase-outs on deducting IRA contributions from your taxable salary. “Phase-out” refers to the gradual reduction of tax benefits, such as deductions or credits, as a taxpayer’s income increases beyond certain thresholds, eventually eliminating the benefit entirely at higher income levels. 

Fortunately, those phase-out limits also go up in 2024 – for joint filers, the phase-out range is from $123,000 to $143,000 (up from $116,000 – $136,000), beyond which you’ll lose the ability to deduct your IRA contributions. The salary range for single filers is from $77,000 to $ 87,000 (up from $73,000-$83,000). 

If you’re looking for more tax-free retirement income, 2024 is a boon for you, too. The income caps on Roth IRA contributions are higher: $230,000 to $240,000 (up from $218,000 – $228,000 in 2023) for joint filers and $146,000 to $161,000 for single filers (up from $138,000–$153,000). However, if you earn more than those limits, you’re not locked out of the Roth – that’s when a Backdoor Roth conversion can be utilized. 

The Backdoor conversion allows you to contribute to a Traditional IRA and then convert those funds into Roth funds. However, there are numerous nuances and potentially significant tax implications, so one should only be conducted with the assistance of a financial professional.

529 Plan Rollovers

If you have excess savings still located in a 529 savings account, you can now roll those funds over to a Roth account in the original beneficiary’s name without penalty or tax. There are a few rules and limitations to be aware of: 

  • The 529 plan must be at least 15 years old. 
  • The amount you roll over can’t exceed contributions and earnings over the prior five years. 
  • You can’t exceed the yearly Roth IRA contribution limit.
  • There’s a lifetime limit of $35,000. 

If you can check all of those boxes, then you can help set your child (likely now a young adult) down the path to retirement success with tax-free Roth IRA funds at an early age.

Roth 401(K) RMDs Abolished

One of the main advantages of the Roth IRA is that there aren’t any Required Minimum Distributions (the minimum amount you must withdraw once you reach a certain age). Until this year, the Roth 401(K) didn’t share the same advantage of lifelong, tax-free growth and distributions. Now, you can let those Roth funds in your 401(K) grow as long as you’d like, giving you much more flexibility in your withdrawal and tax strategies. 

Higher QCD Contribution Limits

Qualified Charitable Distributions are distributions that go straight from your IRA to a qualified charity of your choice. What makes them different from a regular charitable contribution is the fact that you won’t owe any taxes on the distribution, and your taxable income won’t be affected (the funds never go into your hands), all while also helping to satisfy your Required Minimum Distribution (if not outright satisfying it). 

In 2024, you can now contribute up to $105,000 to a charity as a QCD, compared to the 2023 limit of $100,000.

Final Thoughts

Hopefully, you’re now realizing that you may not have to set aside as much for taxes as you normally would. If you take a proactive approach and begin your tax strategy early in the year, you can maximize those savings by using them now instead of waiting for a refund from the IRS. Why waste a year of potential compound gains or, alternatively, pay another year of compound interest on a loan?

This is far from an exhaustive list of the tax changes that took effect in 2024; however, they are some of the most crucial ones. If you’re unsure how your tax situation will play out by the end of the year, we highly recommend sitting down with a CPA. Better yet, sit down with a CPA who is also a wealth manager who can seamlessly combine your tax and investment strategy with your unique situation. That’s what we do here at Walters Advisors. We help clients save on taxes while building their wealth in a tax-efficient manner from now until retirement. If you’d like to learn more about how we can help you do the same, feel free to click the button below!

For informational and educational purposes only and should not be construed as specific investment, accounting, legal or tax advice. Certain information is based on third-party data and may become outdated or otherwise superseded without notice. Third-party information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. The scenario mentioned in this presentation is not an actual client experience. Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency have approved, determined the accuracy, or confirmed the adequacy of this presentation.

About the Authors

  • Douglas Walters

    Doug is the Managing Partner of Walters Strategic Partners, LLC, a licensed Registered Investment Advisory firm. Doug is a licensed Certified Public Accountant (CPA) in the state of Florida and holds a Series 65 Investment Advisor Representative securities license. He is also a member of the AICPA. With over 28 years of experience as a CPA, he believes investment decisions should be based on decades of peer-reviewed research rather than relying on the latest “hot tip” from media outlets. This empirical evidence puts the science of investing to work for his clients.

  • Jose Joia

    Jose M. Joia is a Wealth Advisor at Walters Strategic Advisors, LLC. As a member of the team, Jose’s responsibilities involve comprehensive wealth management, planning and customer service. He has over 6 years of industry experience specializing in planning and solving unique issues his clients encounter. Jose has experience serving individual clients, business owners and non-profit organizations.

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