2024 IRS Cost of Living Adjustments

by | Nov 30, 2023

The IRS has announced new contribution limits for Traditional IRAs, Roth IRAs, 401(k)s, and Simple IRAs for 2024, along with updated Standard Deduction amounts and Marginal Tax Brackets.

The IRS has released its 2024 cost of living adjustments, which include new contribution limits, deduction amounts, and income phaseouts for the 2024 calendar year. For those wanting to contribute more to their retirement plans or those simply wanting to map out their savings strategy for 2024, this is good news. The chart below shows the dollar limitations on benefits and contributions for 2024. Here are some of the highlights.

Contributions to IRAs for 2024

The contribution limit is increasing for IRAs and Roth IRAs in 2024, moving to $7,000 (up from the previous limit of $6,500 in 2023). For those 50 or older, the catch-up contribution remains at $1,000, allowing those in the catch-up range to contribute up to $8,000 toward their IRA or Roth IRA for 2024.

This limit is an aggregate limit between the two types of IRAs. For example, an individual tax filer cannot contribute $7,000 toward a Roth IRA and $7,000 to an IRA. They may only contribute a total of $7,000 across all IRAs. For married couples filing jointly, that contribution limit is doubled as each person may contribute up to the maximum amount.

One caveat to contributing to an IRA or Roth IRA is that you must have earned income to contribute. This can be a hiccup for some retirees who may want to contribute but do not have earned income. For married couples where one spouse has earned income and the other does not, they may still make contributions up to the limit for each individual’s IRA or Roth IRA as long as the earning spouse earns at least $14,000 (in 2024), or $16,000 when including the $1,000 catch-up for each.

In 2024, the IRA deductibility phaseout is also increasing. The phaseout for single filers is from $77,000-87,000, meaning individuals with an adjusted gross income over $87,000 may not deduct Traditional IRA contributions. For married couples, the new phaseout range is $123,00 – 143,000.

For Roth IRAs, individuals must have a modified adjusted gross income (MAGI) of less than $146,000 to make a full Roth IRA contribution. The income phaseout range for Roth IRA contributions in 2024 is $146,000 – 161,000 (MAGI) for single filers. Married couples filing jointly must make less than $230,000 (MAGI) to make full Roth IRA contributions for each individual. The income phaseout range for Roth IRA contributions in 2024 is $230,000 – $240,000 for married couples filing jointly.

Contributions to Retirement Plans for 2024

The contribution limits for retirement plans are also going up in 2024, including for Simple IRAs and 401(k)s. The new 401(k) salary deferral limit is $23,000 for 2024, up from $22,500 in 2023. The catch-up contribution amount will remain at $7,500, allowing for total deferrals of $30,500 for individuals 50 and older.

Simple IRA deferral limits have increased for 2024, allowing up to $16,000 of deferrals, plus an additional $3,500 in catch-up contributions for those 50 and older.

2024 Standard Deduction and Marginal Tax Brackets

The individual standard deduction increased in 2024 to $14,600, up from $13,850 in 2023. For married couples, the 2024 standard deduction is $29,200, up from $27,700 in 2023. Senior citizens age 65 or older will receive an additional $1,950 deduction (single filers) or $1,550 per individual (married filers).

There are seven marginal tax brackets in 2024: 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 37 percent. Each marginal bracket’s income range received an approximate 5.4% increase for 2024 vs. 2023 (see this link for a complete list of updated marginal income tax brackets for 2024 and for more information on 2024 cost of living adjustments). 

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Joe Allaria, CFP®

Joe Allaria, CFP®

Wealth Advisor | Partner

As featured in The Wall Street Journal, USAToday.com, CNBC.com, Nasdaq.com, and Yahoo Finance.

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