2024 Year-End Tax Updates Guide and Financial Planning Considerations from SWP
At Strategic Wealth Planning, we believe that tax planning is not just an annual activity but a foundational aspect of comprehensive financial and estate planning. Effective tax strategies can significantly impact wealth accumulation, retirement readiness, and legacy goals, which is why tax planning is embedded in every planning and investment service we offer. Our core value is to help you not only grow and protect your wealth but also to ensure it is managed in the most tax-efficient manner possible.
As 2024 comes to a close, SWP is here to provide you with comprehensive guidance to maximize your savings, prepare for the future, and fully leverage the year’s tax changes in alignment with your financial goals.
Key 2024 Tax Updates
- Adjusted Tax Brackets and Standard Deduction
To account for inflation, 2024 tax brackets have shifted, with seven tax rates still in place. For single filers, the 10% rate applies up to $11,600, while joint filers start at $23,200. The 37% top rate begins at $609,351 for single filers and $731,201 for joint filers. Additionally, standard deductions have increased, rising to $14,600 for single filers, $21,900 for heads of household, and $29,200 for married couples filing jointly. These adjustments aim to offer some relief against inflationary pressures. For a full breakdown of the 2024 federal income tax rates and brackets, visit the IRS official page. - Increased Contribution Limits for IRAs, 401(k)s, and HSAs
To help clients save more for retirement and health expenses, the IRS raised contribution limits. In 2024, individuals can contribute up to $7,000 to a traditional or Roth IRA, with an additional $1,000 catch-up contribution for those aged 50 and over. The 401(k) contribution limit has increased to $23,000, with a $7,500 catch-up option for individuals over 50. Health Savings Accounts (HSAs) also saw a limit increase to $4,150 for individuals and $8,300 for families, with an additional $1,000 catch-up for those 55 and older, helping clients with high-deductible health plans manage their healthcare costs effectively. - Itemized Deduction Rules Remain Largely Unchanged
While many taxpayers may still find the higher standard deduction preferable, itemized deductions remain available and mostly unchanged. The state and local tax deduction remains capped at $10,000. Mortgage interest deductions are still limited to interest on up to $750,000 of mortgage debt (or $1 million for mortgages prior to December 16, 2017). Medical expenses exceeding 7.5% of Adjusted Gross Income (AGI) are deductible, and charitable donation deductions are available up to 60% of AGI for cash donations to qualified charities. No miscellaneous itemized deductions are allowed this year. - Child Tax Credit and Alternative Minimum Tax (AMT) Exemptions Updated
In 2024, the Child Tax Credit remains at $2,000 per child under 17, with income phase-outs starting at $400,000 for joint filers and $200,000 for single filers. The AMT exemption increased to $85,700 for single filers and $133,300 for married couples filing jointly. Phase-out thresholds begin at $1,218,700 for joint filers and $609,350 for other taxpayers, making this primarily an issue for higher-income households. - Estate and Gift Tax Exemption Increased
The estate tax exemption, indexed to inflation, rose to $13,610,000 per individual in 2024 (this higher exemption may be reduced significantly after 2025 without Congressional action.). For those focused on family wealth transfers, the annual gift exclusion rose to $18,000 per recipient, a modest increase that can add up for those who maximize their gifting strategies. - Required Minimum Distributions (RMDs) and Associated Penalties
Starting January 1, 2023, the age for required minimum distributions (RMDs) is 73, giving an extra year before withdrawals are mandatory. If you turned 72 in 2022 or earlier, continue your RMDs as planned. If you turn 72 in 2023, you can take your first RMD by December 31, 2024, or delay until April 1, 2025—delaying means taking two RMDs in 2025, which could increase your tax burden. At SWP, we can help you navigate these changes to minimize your tax impact.
For Our Planning Clients
Strategic Wealth Planning is here to support and advise you in your year-end financial moves. As your trusted financial planning partner, SWP will provide actionable guidance and uncover high-impact strategies tailored to your financial picture. Below are key considerations we recommend evaluating to close out 2024 on a strong financial note:
- Income Strategy – Accelerate or Defer?
If you expect your income to be lower next year (perhaps in retirement), deferring income could reduce this year’s tax burden. Alternatively, if your income is temporarily low this year, SWP can guide you through strategies like Roth conversions to capitalize on the current tax rate. - Capital Gains Management
Capital gains tax can be reduced by offsetting gains with losses through tax-loss harvesting. SWP can assess your portfolio, helping you identify the most tax-efficient strategies to offset gains and preserve more of your wealth. - Maximizing Tax-Advantaged Accounts
SWP is ready to help you make the most of your contributions to IRAs, 401(k)s, and HSAs, which can lower your taxable income and enhance retirement savings. Let’s discuss your retirement strategy and ensure you’re positioned for long-term tax efficiency. - Planning for Life Changes
We recognize that financial plans often need to adapt to life’s changing circumstances. If you’re considering a major move, like buying a home or transitioning careers, we’ll help adjust your strategy to keep you on track with your broader financial goals. - Annual Review and Future Outlook
Reflecting on your financial strategy can help ensure you’re comfortable with your risk tolerance, liquidity levels, and asset allocation. Together, we’ll assess any insights from the year that might refine your approach for 2025.
Next Steps with Strategic Wealth Planning
At SWP, we view financial planning as an ongoing partnership tailored to your goals and needs. Connect with us today to discuss your year-end tax strategies and any upcoming life changes. Whether it’s maximizing your tax savings, optimizing your portfolio, or preparing for major financial milestones, SWP is here to help you turn plans into action.
