Personal finance never stays the same. You need to know what’s going to change in 2024 so you can do your best planning. Let’s keep it short and sweet (as if that’s possible in finance!).

Giving Money Away!

You can give anyone $18,000 a year without paying gift tax. That’s a thousand dollars more than 2023. Use that for giving to kids, grandkids, sisters, brothers, parents. People. If you give to charities, the thresholds are higher.

If you give from your IRA and are over age 70½, you can give up to $105,000 to a qualified charity (not a Donor Advised Fund). Once in a lifetime, you can gift up to $53,000 to a split-interest entity like a CRUT or CRAT or CGA.

Income Taxes

Standard deductions for income tax inched up. If you’re single, now you can deduct $14,600. Married filing jointly, $29,200. If you want to itemize deductions, you have to get over those thresholds. New brackets can be found on multiple sites online.

Estate Taxes

The amount you can give away during life or at death without paying gift or estate tax also crept up. Now it’s $13.61 million per person. So as a couple, that’s $27.22 million. Most of you won’t have that, but if you do, you want to think about some planning before 2026 when that exemption drops in half (approximately).

Retirement Plan Contributions

If you are putting away money in retirement plans, there are some changes to what you can contribute.

Traditional and Roth IRAs:

The contribution limit is $7,000 with a $1,000 catch-up if you’re over age 50.

But, if you are making deductible contributions to a traditional IRA, there are some threshold changes. If you don’t participate in a company retirement plan and neither does your spouse, deductions are phased out completely if you earn more than $240,000.

If you do participate in a company retirement plan, deductions will be completely phased out for singles with income over $87,000 and for MFJ $143,000.

For Roth IRAs, singles can contribute as long as income is under $161,000 and MFJ at $240,000.

SEPs and SIMPLEs:

If your employer is funding the SEP plan, they can contribute up to 25% of your salary (up to $345,000) or $69,000, whichever is less. If you are a sole proprietor, you can contribute up to 20% or $69,000, whichever is less.

In a SIMPLE plan, employees can contribute up to 100% of salary up to a max of $16,000. Catch-up contributions are $3,500.

401(k), 403(b):

The contribution can be up to $23,000 plus $7,500 if you are over age 50. That’s $30,500 total over age 50. Plus any company match.

If you have a paired Profit Sharing plan with a 401(k), you can contribute up to $69,000 plus a catch-up contribution of $7,500 if over age 50.

Health Savings Accounts (HSAs):

While technically not a retirement account per se, many people sock away money in these accounts to use in retirement for medical costs. Single people can contribute up to $4,150, families $8,300. If you are over age 55, you can make additional catch-up contributions of $1,000.

A little-known fact: Once you are age 65 or older, you can use your HSA account to pay for any qualified medical costs that you’ve incurred after you opened your account. You can go back to a cost you had before age 65 (but after you opened your account) and get reimbursed for those costs.

Retirement Plan Distributions

There are rules for putting money into plans and rules for taking it out. So many rules…

Inherited IRAs (non-spouse):

Starting with the SECURE Act, if you inherit an IRA in 2020 or later, you have 10 years to take that money out (actually 11 years if you count the year you inherited the IRA). The clock starts the year after the owner died.

If you inherit a Roth IRA, there is no tax due when the money comes out. So you could take it all out on the last day and not worry about the tax implications.

Not so with traditional IRAs. You pay tax on what you withdraw every year. So you should be strategic about when you pull that money out. You could go ratably each year. If you have erratic income, you might match your withdrawals to the lower income years. Think about required minimum distributions on your own IRAs once you’re age 73 or older. Or when you sell a business. Or any other higher income event.

Inherited IRAs (spouses and non-spouses):

Remember to take the last Required Minimum Distribution (RMD) if the owner was over age 73 before you roll over the IRA to an inherited IRA.

Your Own Traditional IRA:

Once you are age 73, you have to start taking RMDs.

The most important thing you can do in 2024 is enjoy your life every day and if you are younger, make sure you are saving for the future. It will give you more freedom at every point in your life. And knowing the thresholds that affect taxes and savings mean you make the most of the opportunities you find along the way.

Disclosures
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