Is a Tax Break in Your Future?
• 3 min read
- Brief: Taxes
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Now that the Internal Revenue Service (IRS) has released information for 2024 on income tax thresholds, standard deductions, and other brackets, there’s still time to compare your financial planning options for this year and next.
The IRS’s inflation adjustment means more of your income could fall into a lower tax bracket, and you may wish to consider some tax-shifting strategies.
Examples Of Tax-Year Shifting Strategies
- Depending on your expected income for the coming year, you may decide to defer income by having year-end bonuses or deferred compensation awards paid in 2024.
- Consider whether to harvest capital losses in investment accounts to offset any capital gains and perhaps even create a tax-loss carryforward for future years.
- You could pre-pay property tax bills for 2024 in this calendar year to increase 2023 deductions.
- Consider bunching future planned charitable contributions in this calendar year by making a lump-sum gift to a donor-advised fund.
- “Superfund” a 529 plan to educate children or grandchildren by pulling forward the next five years of contributions into this calendar year.
- Take advantage of new 2023 tax credits before year-end by investing in clean energy projects around the home or buying a new or used electric vehicle.
- Utilize the current historically high lifetime estate and gift exemption to your estate planning advantage before it potentially reverts to a lower amount after 2025.
Contribution, Threshold and Exemption Amounts
The following tables, sourced from the IRS, include helpful information on deferred accounts and exemptions that we find clients ask for frequently.
Federal Income Tax Brackets: 2023-2024
| TAX RATE | SINGLE | HEADS OF HOUSEHOLD | MARRIED FILING JOINTLY | |||
|---|---|---|---|---|---|---|
| 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | |
| 37% | $578,125 or more | $609,350 or more | $578,100 or more | $609,350 or more | $693,750 or more | $731,200 or more |
| 35% | Over $231,250 but not over $578,125 | Over $243,725 but not over $609,350 | Over $231,250 but not over $578,100 | Over $243,700 but not over $609,350 | Over $462,500 but not over $693,750 | Over $487,450 but not over $731,200 |
| 32% | Over $182,100 but not over $231,250 | Over $191,950 but not over $243,725 | Over $182,100 but not over $231,250 | Over $191,950 but not over $243,700 | Over $364,200 but not over $462,500 | Over $383,900 but not over $487,450 |
| 24% | Over $95,375 but not over $182,100 | Over $100,525 but not over $191,950 | Over $95,350 but not over $182,100 | Over $100,500 but not over $191,950 | Over $190,750 but not over $364,200 | Over $201,050 but not over $383,900 |
| 22% | Over $44,725 but not over $95,375 | Over $47,150 but not over $100,525 | Over $59,850 but not over $95,350 | Over $63,100 but not over $100,500 | Over $89,450 but not over $190,750 | Over $94,300 but not over $201,050 |
| 12% | Over $11,000 but not over $44,725 | Over $11,600 but not over $47,150 | Over $15,700 but not over $59,850 | Over $16,550 but not over $63,100 | Over $22,000 but not over $89,450 | Over $23,200 but not over $94,300 |
| 10% | Not over $11,000 | Not over $11,600 | Not over $15,700 | Not over $16,550 | Not over $22,000 | Not over $23,200 |
Individual Retirement Account (IRA) and Retirement Plan Contribution Limits: 2023-2024
| RETIREMENT PLAN | AMOUNT OF ANNUAL CONTRIBUTIONS/ELECTIVE DEFERRALS | CATCH-UP CONTRIBUTIONS (if attain age 50 by end of year) |
||
|---|---|---|---|---|
| 2023 | 2024 | 2023 | 2024 | |
| IRAs—Traditional & Roth | $6,500 | $7,000 | $1,000 | $1,000 |
| 401(k) | $22,500 | $23,000 | $7,500, if plan allows | $7,500, if plan allows |
| SIMPLE | $15,500 | $16,000 | $3,500, if plan allows | $3,500, if plan allows |
Individual Retirement Account (IRA) and Retirement Plan Deadlines: 2023-2024
| RETIREMENT PLAN | ESTABLISHMENT DATE | FUNDING DATE |
|---|---|---|
| IRAs—Traditional & Roth | By date that income tax returns are filed, no later than April 15 | By date that income tax returns are filed, no later than April 15 |
| Simplified Employee Pension (SEP) | By date that income tax returns are filed, including time of extension | By date that income tax returns are due, including time of extension |
| SIMPLE | By October 1 of current tax year | By date that income tax returns are due, including time of extension |
| Self-employed retirement plans (defined benefit and solo 401(k) plans) | By date that income tax returns are filed, including time of extension | By date that income tax returns are due, including time of extension |
Federal Tax Threshold Amounts and Standard Deductions: 2023-2024
| FILING STATUS | SINGLE | MARRIED FILING JOINTLY | TRUSTS & ESTATES | |||
|---|---|---|---|---|---|---|
| 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | |
| 37% Ordinary Income Rate* | $578,125 | $609,350 | $693,750 | $731,200 | $14,450 | $15,200 |
| 20% Long-term Capital Gain Rate* | $492,300 | $518,900 | $553,850 | $583,750 | $14,650 | $15,450 |
| 0% Long-term Capital Gain Rate* | $44,625 | $47,025 | $89,250 | $94,050 | $3,000 | $3,150 |
| 3.8% Medicare Surtax** | $200,000 | $200,000 | $250,000 | $250,000 | $14,450 | $15,200 |
| 0.9% Medicare Contribution Tax*** | $200,000 | $200,000 | $250,000 | $250,000 | N/A | N/A |
| Standard Deduction | $13,850 | $14,600 | $27,700 | $29,200 | N/A | N/A |
| Additional Deduction if Age 65 or Blind | $1,850 | $1,950 | $1,500 | $1,550 | N/A | N/A |
| 199A (Qualified Business In-come Deduction) Threshold Limit | $182,100 | $191,950 | $364,200 | $383,900 | $182,100 | $191,950 |
| 199A (Qualified Business Income Deduction) Threshold Limit Phased Out | $232,100 | $241,950 | $464,200 | $483,900 | $232,100 | $241,950 |
**Based on modified AGI (AGI plus net foreign earned income exclusion); not inflation adjusted.
***Based on earned income; not inflation adjusted.
Alternative Minimum Tax Exemptions (AMT) and Rates: 2023-2024
| AMT EXEMPTION | AMT RATE ON AMT INCOME | ||||||
|---|---|---|---|---|---|---|---|
| Filing Status | 2023 | 2023 Phase-Out | 2024 | 2024 Phase-Out | Rate | 2023 | 2024 |
| Single | $81,300 | $578,150 – $903,350 | $85,700 | $609,350 – $952,150 | 26% | Up to $220,700 | Up to $232,600 |
| Married Filing Jointly | $126,500 | $1,156,300 – $1,662,300 | $133,300 | $1,218,700 – $1,751,900 | 28% | Over $220,700 | Over $232,600 |
Kiddie Tax Threshold: 2023-2024
| 2023 | 2024 | |
|---|---|---|
| No Tax on Initial Level of Unearned Income Up to | $1,250 | $1,300 |
| Tax at Child’s Rate on Next Level of Unearned Income | $1,250 | $1,300 |
| Total Kiddie Tax Threshold | $2,500 | $2,600 |
Federal Estate, Gift, and GST Exemptions: 2023-2024
| 2023 | 2024 | ||||||
|---|---|---|---|---|---|---|---|
| Annual Gift Tax Exclusion | Lifetime Gift Tax Exemption | Estate Tax Exemption | GST Tax Exemption | Annual Gift Tax Exclusion | Lifetime Gift Tax Exemption | Estate Tax Exemption | GST Tax Exemption |
| $17,000 | $12.92 million | $12.92 million | $12.92 million | $18,000 | $13.61 million | $13.61 million | $13.61 million |
Health Account Contribution Limits: 2023-2024
| TYPE OF ACCOUNT | 2023 | 2024 |
|---|---|---|
| Flexible Spending Account (FSA) | $3,050 | $3,200 |
| Health Savings Account (HSA)—Individual | $3,850 | $4,150 |
| Health Savings Account (HSA)—Family | $7,750 | $8,300 |
| HSA Additional Contributions for those age 55+ | $1,000 | $1,000 |
Long-Term Care Insurance—Eligible Premium Amounts: 2023-2024
| POLICYHOLDER’S AGE | 2023 | 2024 |
|---|---|---|
| Age 40 or younger | $480 | $470 |
| Age 41 to age 50 | $890 | $880 |
| Age 51 to age 60 | $1,790 | $1,760 |
| Age 61 to age 70 | $4,770 | $4,710 |
| Age 71 or older | $5,960 | $5,880 |
Charitable Contribution Deductions: 2023-2024
| PUBLIC CHARITIES | PRIVATE FOUNDATIONS | |
|---|---|---|
| Cash Donations | 60% of AGI limitation (50% before Tax Cut and Jobs Act of 2017) | 30% of AGI limitation |
| Appreciated Property Donations | Fair market value (FMV) of long-term capital gain property is deductible only up to 30% of AGI limitation | Basis of long-term capital gain property is deductible only up to 20% of AGI limitation. FMV deduction for publicly traded stock |
Plan to Your Unique Circumstances
At AMG, we plan comprehensively, counseling each client on their unique circumstances, needs, and desires. Because of the clarity gained through our proprietary Financial Security Analysis, integrated tax projections and cash flow analyses, clients can make prompt and informed decisions and know that AMG can implement them with confidence.
HOW AMG CAN HELP
Not a client? Find out more about AMG’s Personal Financial Management (PFM) or to book a free consultation call 303-486-1475 or email us the best day and time to reach you.
This information is for general information use only. It is not tailored to any specific situation, is not intended to be investment, tax, financial, legal, or other advice and should not be relied on as such. AMG’s opinions are subject to change without notice, and this report may not be updated to reflect changes in opinion. Forecasts, estimates, and certain other information contained herein are based on proprietary research and should not be considered investment advice or a recommendation to buy, sell or hold any particular security, strategy, or investment product.
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