As individuals earn more money through work or investments, they may need to adjust their tax withholdings or estimated tax payments based on their changing situation. Here are some tips for individual taxpayers to increase cash flow, retirement savings or donations to favorite causes as part of tax planning.
401(k) Plan Contribution Limits in 2024
Individuals can contribute up to $23,000 to their 401(k) plans, 403(b) plans and most 457 plans in 2024. This is an increase from $22,500 in 2023. This is an annual cost-of- living adjustment. The catch-up limit for employees who have reached age 50 and over who participate in these plans is $7,500 for 2024 (and 2023).
If you have IRAs, the contribution limit for 2024 will rise to $7,000 (from $6,500 for 2023). The IRA catch-up contribution for those age 50 and over remains $1,000.
Check Withholding or Estimate Tax Payments in 2024
The federal Tax Withholding Estimator tool through the IRS.gov website enables individual taxpayers to calculate federal tax withholding and see how it affects refunds, take-home pay and taxes due.
If you or an employer are not withholding enough tax, talk to your CPA about starting or increasing estimated tax payments. It is important to check your withholding if you have experienced major changes in income. This could include a job promotion or end-of-year bonus, job change, business growth or pending retirement.
Increase Charitable Giving Through IRAs
Eligible IRA owners who are at least 701/2 can use a transfer known as a qualified charitable distribution (QCD) to transfer up to $100,000 annually to a 501(c)(3) organization tax-free. Married couples where both spouses meet the age requirement and have IRAs can donate up to $200,000 annually. They can’t take a charitable deduction, but the money is removed from their taxable income, which could make them eligible for other tax breaks.
For taxpayers at least 73 years old by year’s end, a QCD donation can be counted as part of the IRA owner’s annual required minimum distribution.
Be wary of charity scams that solicit donations. They often have names similar to legitimate charities. Be careful to check the names of the charities when receiving communications before donating in order to preserve the charitable tax deduction.
If you have questions about reducing individual or family tax impacts, talk to the knowledgeable tax advisors at LvHJ. We work with complex, and high-net-worth individual tax situations as well as family offices.
Next: Family Estate Valuations
Source: Checkpoint Marketing
