Shakespeare Blog: View from the Lake

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2024 Important Numbers

Written ByBrian Ellenbecker, CFP®, EA, CPWA®, CIMA®, CLTC®

Now that the 2023 tax season ended a few weeks ago, it’s time to put more of our focus on 2024 tax planning. Tax figures for 2024 rose by 5.4% from 2023 (a bit lower than the 7.1% increase from 2022 to 2023). While higher inflation on goods is usually viewed as a bad thing, higher inflation on the tax brackets and deduction amounts can be a good thing, as it typically results in a lower tax bill when compared to the prior year, all else being equal.

Let’s examine some key items on the 2024 Important Numbers infographic posted below:

Important Numbers 2024

Page 1

Looking at the ‘Federal Income Tax’ brackets near the top left, you can see the tax rate at which various levels of income are taxed for 2024. The good news for taxpayers is that every year, the income bands get wider due to inflation increases, meaning more income is taxed at lower rates when compared to the prior year. The same holds true for the ‘Long-Term Capital Gains’ rates listed a bit further down in the first column. The income thresholds for the 3.8% net investment tax do not receive inflation adjustments and have been at the $200,000/$250,000 level since the tax was created back in 2013.

The ‘Standard Deduction’ shown on the top right of the table also increases every year. This number helps reduce the amount of income subject to tax, so the higher the number, the better. This is another example of where inflation increases help a taxpayer.

The rest of the rows on the right deal with key ‘Social Security’ and ‘Medicare Premium’ thresholds. If you’re still working, employment income at or below $168,600 is subject to the Social Security and Medicare payroll taxes. Of your total income, 6.2% goes to Social Security, while 1.45% goes to Medicare. Once your income exceeds $168,600, you no longer need to contribute to Social Security, but there is no income cap for Medicare. In fact, once your employment income exceeds $200,000 for single filers or $250,000 for married filers, you are required to pay into Medicare an additional 0.9% of your income above those thresholds.

The bottom right section deals with ‘IRMAA Surcharge’, the extra amount you need to pay in Medicare premiums if your income exceeds a certain threshold. Those thresholds are shown on the table, along with the resulting monthly premium increase. Remember, this increase is per person, so married couples would pay twice the amount shown in the table. 2024 Medicare premiums are based on 2022 income. Medicare tests your income each year, so if your income drops in a future year, you would see a resulting decline in your Medicare premiums.

Page 2

The second page primarily lists retirement account related numbers, mostly dealing with contribution limits and factors for calculating required distributions on your retirement accounts or a retirement account you may have inherited.

Near the bottom of the right column under ‘Estate & Gift Tax’, you can see the current estate and lifetime gift exclusion amount of $13,610,000. Both members of a married couple receive an exclusion, so their combined estate exemption is $27,220,000.

Remember the current tax and estate laws are set to expire at the end of 2025. If Congress doesn’t make an adjustment, we could see many of these numbers change in a dramatic fashion. The Shakespeare team is closely monitoring these potential changes and are here to answer your questions. Your Shakespeare advisor and tax professional will be your partner to help provide peace of mind for your financial plan.