We’ve all heard the adage that the only things that are sure in this life are death and taxes…we need to be mindful of change, at least as it pertains to taxes.
It’s important to maximize saving for retirement and take advantage of the provision of the tax law that allow taxpayers to save funds in tax-deferred accounts…for 2024, the limit or most plans (401(k), 403(b) and 457 plans) increases from $22,500 to $23,000 with another $7,500 for those age 50 and over. That means that taxpayers age 50 and over can add $30,500 to their plans in 2024, the highest amount ever allowed.
Similarly, SIMPLE plans will have new elective deferral limits: $16,000 up from $15,500 and a catch-up amount of $3,500 for those 50 and over. IRAs will have a 2024 contribution limit of $7,000 up from $6,500 this year, with an unchanged catch-up amount of $1,000 for those 50 and older.
There are other changes for SEPs, ESOPs and cash-balance plans in store for 2024. For those who participate in them, taxpayers should consult their accountants and financial advisors for more details. Why maximize savings in these types of plans and accounts? Earnings in these plans are tax free until withdrawn, which for many is not required until age 73 or if born in 1960 or later, age 75.
Gift and Estate Tax
Taxpayers can make gifts or have an estate of over $13 million in 2024 without having a federal gift or estate tax imposed. The maximum amount that may be given as a gift without having to report it to the IRS to count against that credit – what is known as the annual exclusion amount – is going up to $18,000 for 2024 from $17,000 in 2023. This amount has been increasing steadily over the past several years.
Corporate Transparency Act
Taking effect in 2024 is a new federal law to help the Financial Crimes Enforcement Network (FinCen) uncover criminal activity through corporations, LLCs and the like. It requires certain types of existing entitles to report beneficial ownership information by December 31, 2024 and for new entities formed after this year, to make such reports within 30 days of formation. If you are an owner or have a beneficial interest in a corporation or LLC or other entity that is formed by filing documents with the state, you may be required to make reports. For more information, go to https://www.fincen.gov/boi.
Please remember that financial and tax situations differ widely from person to person, and there is no one size fits all for most of these situations. Consult with your financial and tax advisors for how any of these or other provisions that are changing in 2024 may affect you.