These adjustments are part of the annual cost-of-living changes, responding to the persistent rise in inflation and some changes from the SECURE 2.0 Act.
Let’s break down the changes and what they mean for you.
Increase in 401(k) Contributions
Starting in 2024, individuals can contribute up to $23,000 to their 401(k) plans, a boost from the previous limit of $22,500 in 2023. This means you can put more towards your retirement savings.
Increase in IRA Contributions
In line with the same cost-of-living adjustments, the IRS has raised the contribution limit for Individual Retirement Accounts (IRAs) to $7,000, up from $6,500 in the previous year. This offers more flexibility and potential savings.
Other Retirement Plans
These changes aren’t exclusive to 401(k) and IRA accounts. Employees participating in 401(k), 403(b), and most 457 plans, as well as the federal government’s Thrift Savings Plan, will also see an increase in their contribution limit to $23,000 from $22,500.
Additionally, those aged 50 and over can take advantage of catch-up contributions. This limit remains at $1,000 for 2024 for IRAs, while those participating in 401(k), 403(b), and most 457 plans can contribute up to $7,500 in catch-up contributions for 2024. Those aged 50 and older can now contribute up to $30,500 to their retirement accounts for 2024.
Income Ranges and Tax Benefits
The changes extend to income ranges for determining eligibility for certain tax benefits and deductions. The 2024 income phase-out ranges for deductible contributions to traditional IRAs, contributions to Roth IRAs, and eligibility for the Saver’s Credit have all increased:
- For single taxpayers covered by a workplace plan, the phase-out range is between $77,000 and $87,000.
- Married couples filing jointly, where a workplace plan covers the contributing spouse, will find the phase-out range increased from $123,000 to $143,000.
- Married individuals not covered by a workplace plan but married to someone who is will see their phase-out range between $230,000 and $240,000.
- The phase-out range remains between $0 and $10,000 for married individuals filing separately with workplace plan coverage.
For Roth IRAs, the phase-out ranges for singles and heads of households have increased to between $146,000 and $161,000. The capacity for married couples filing jointly is now $230,000 to $240,000.
Saver’s Credit
The Saver’s Credit, designed to assist low-and moderate-income workers, has also seen adjustments. The income limits for this credit are now set at $76,500 for married couples filing jointly, $57,375 for heads of households, and $38,250 for singles and married individuals filing separately.
Other Notable Changes
The SECURE 2.0 Act, passed at the end of 2022 as part of the Consolidated Appropriations Act of 2023, introduced several other changes. Notably, it increased the limit on premiums for qualifying longevity annuity contracts to $200,000, with no changes for 2024. Additionally, it raised the deductible limit on charitable distributions to $105,000 for 2024, up from $100,000. The deductible limit for a one-time election to treat a distribution from an individual retirement account made directly by the trustee to a split-interest entity has also increased to $53,000 for 2024, up from $50,000.
For more detailed information on these changes and how they may affect your financial planning, refer to Notice 2023-75.
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