Every year the IRS changes tax limitations to account for inflation and other economic factors. These adjustments ensure that tax-related figures like income brackets, deduction amounts, and contribution limits remain up to date and reflective of current economic environments. The top five changes for 2024 that you should be aware of surround Traditional IRAs, phase outs, Roth IRAs, company sponsored plans, and gift tax benefits.
Traditional and Roth IRA Annual Contribution Limits
With these recent adjustments by the IRS the 2024 annual contribution limit was increased by $500 to $7,000 for both Traditional and Roth IRAs, allowing individuals an enhanced opportunity to maximize their retirement savings. Last year annual contribution limits for both Traditional and Roth IRAs maxed out at $6,500 with an additional contribution of $1,000 allowed for those over the age of fifty qualifying for catch up programs.
Phase Outs
Individuals contributing to Traditional IRAs with income of $77,000 or below qualify for full deductions in 2024, and partial deductions up to $87,000. Individuals making more than $87,000 do not qualify for Traditional IRA contributions, a $5,000 increase from last year’s phase out limit of $83,000. Married individuals filing jointly with combined income below $230,000 qualify for full deduction this year while those with combined income above $240,000 do not qualify for Traditional IRA contributions, a $12,000 increase from last year.
Individuals contributing to Roth IRAs with income of $146,000 or below qualify for full deductions in 2024, and partial deductions up to $161,000. Individuals making more than $161,000 do not qualify for Roth IRA contributions, an $8,000 increase from last year’s phase out limit of $153,000. Married individuals filing jointly who contribute to Roth IRAs fall under the same phase out limitations as Traditional IRA contributors in 2024.
Company and Employer Sponsored Plans
The annual limit for tax-deferred contributions into qualified retirement plans, 401(k)s and 403(b)s, rose $500 to $23,000 this year. Maximum annual additions to SEP IRAs rose to $69,000 in 2024, up $3,000 from last year. The new maximum compensation that will be considered for SEP IRA individuals is now $345,000. Individuals over fifty years old who qualify for catch up programs are still entitled to a $3,500 additional contribution.
Gift and Estate Taxes
Annual gift exclusion tax exemptions continue to rise this year as well. A $1,000 increase from last year’s $17,000 limit now allows individuals to make charitable contributions up to $18,000 tax free annually. It is important to remember that substantiation is required for gifting, so remember to keep track of your un-taxable expenses!
If you have any questions or are interested in learning more about the 2024 tax limitation changes, please reach out to our team or check out the 2024 Tax Reference Guide here.
Summary
The IRS raised the 2024 annual contribution limits for Traditional and Roth IRAs by $500, bringing the cap to $7,000 (plus a $1,000 catch-up for those over 50). Traditional IRA deduction eligibility phases out between $77,000–$87,000 for individuals and $230,000–$240,000 for joint filers, reflecting inflation adjustments. Roth IRA contribution eligibility uses similar income phase-out ranges: full contributions up to $146,000, partial to $161,000 for individuals, and joint filers match Traditional IRA thresholds. Employer-sponsored plan limits increased, with 401(k)/403(b) annual contribution limits rising to $23,000 and SEP-IRA maximum additions reaching $69,000, based on compensation limits of $345,000. The annual gift tax exclusion rose by $1,000 to $18,000, with gifting substantiation requirements noted for tax-free transfers.
Disclosure:
Green Ridge Wealth Planning, LLC is a registered investment adviser. The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment/tax advice. The investment/tax strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment/tax strategy for his or her own particular situation before making any investment decision(s). You are responsible for consulting your own investment and/or tax advisor as to the consequences associated with any investment.
The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Any opinions, projections, or forward-looking statements expressed herein are solely those of the AUTHOR, may differ from the views or opinions expressed by other areas of Green Ridge Wealth Planning, LLC, and are only for general informational purposes as of the date indicated.