Planning Updates for 2024

The new year brings tax and retirement changes. Here is a summary of the most relevant and a look forward to the very important changes that are ‘on the books’ to take effect in 2026.

2024 Changes

Income Tax

Newly adjusted federal tax brackets and standard deduction amounts can be found here – https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2024.

17 states cut income tax rates this year. Georgia moved to a flat tax and collapsed its six tax brackets into one rate of 5.49%. The state’s standard deduction of $5,400 for single filers, and $7,100 for married filers filing jointly, is eliminated in favor of raising the existing personal exemption, which is increased to $12,000 annually for single filers and $18,500 for married couples filing jointly.

Retirement Contributions

• Contribution limits for employer-sponsored or small business plans (401(k)s, 403(b)s, etc.) have increased by $500 to $23,000 (or $30,500 for those age 50+).
• IRA contribution limits increased by $500 to $7,000 (or $8,000 for those age 50+).

Gifts and Estates

• You can gift an additional $1,000, for a total of $18,000 per recipient, tax-free this year. Double this if you are splitting gifts and filing a gift tax return with your spouse. If you are interested in ‘superfunding’ a 529 plan, where gifts in year one are considered split evenly over five years, a single donor could gift $90,000 this year to a beneficiary.
• 529 account holders may now roll over up to $35,000 of unused 529 balances to a Roth IRA (if the account has been active for 15 years) in increments that follow annual IRA contribution limits.
• The federal lifetime gift and estate tax exemption has increased from $12.92 million to $13.61 million per person, or $27.22 million for married couples.

Forewarning of Changes from January 1, 2026

• The individual marginal tax rates are poised to revert to the pre-Tax Cuts & Jobs Act’s (TCJA)  structure. The existing top marginal rate of 37% will give way to a 39.6% top rate.
• The TCJA temporary increase in the lifetime gift and estate tax exemption and GST exemption is set to expire. This change will reduce the exemption to the pre-2018 $5 million level adjusted for inflation which is about $7 million.
• The 20% deduction for an individual’s domestic qualified business income from a partnership, S corporation, or sole proprietorship is scheduled to expire.
• The current $10,000 limitation on state and local taxes (SALT) deductibility is set to expire.
• Modifications to the alternative minimum tax (AMT) are likely. This could expand the tax to more taxpayers.
• The ability to deduct interest on mortgage debt will increase from the current cap of $750,000 to $1 million.
• The adjusted gross income (AGI) limitation for certain charitable contributions will decrease from 60% to 50%.
• Rules governing the standard deduction, individual exemptions, and the overall limitation on itemized deductions will revert to pre-TCJA regulations.

If you are looking to leverage the current increased lifetime exemption, which is set to sunset at the end of 2025, now is the time to consider your options!

Whitney Butler