At Voyage Tax Consulting, we take pride in offering a diverse range of expert services designed to empower your business and drive success. We are committed to delivering tailored solutions that align with your unique goals and challenges. Numerous tax changes reflect inflation and introduce new rules for 2024. Proper tax planning requires awareness of what's new and different from last year. Pay attention to these changes, as they can either hurt or help your bottom line.

Business tax changes

Depreciation

In 2024, first-year bonus depreciation for new and used qualifying business assets with lives of 20 years or less has decreased from 80% to 60%. However, the Section 179 expensing limit has increased to $1,220,000, with a phase-out once more than $3,050,000 of assets are put into business use in 2024. It's important to note that the amount of business assets expensed cannot exceed the business’s taxable income, while bonus depreciation does not have this limitation.

Pass-through income

The dollar threshold for the 20% deduction for pass-through income will increase in 2024. Self-employed individuals, LLC owners, S corporations, and other pass-through entities can deduct 20% of their qualified business income. However, this deduction is subject to limitations for individuals with taxable incomes exceeding $383,900 for joint filers and $191,950 for all others.

Household / Individual tax changes

Retirement & Tax-Saving Accounts changes

• Leftover funds in 529 education accounts can be rolled tax-free to a Roth IRA, with a lifetime cap of $35,000. Yearly rollover amounts can’t exceed the annual pay-in limit for Roth IRAs, which is $7,000 for 2024. Additionally, the 529 account must have been open for over 15 years.

• The qualified charitable distribution cap is indexed for inflation so that IRA owners 70½ and older can transfer up to $105,000 in 2024 from their IRAs directly to charity without paying tax on the withdrawal.

• The maximum 401(k) contribution is $23,000, with an additional $7,500 for individuals born before 1975. For Roth and traditional IRAs, the 2024 contribution cap is $7,000, with a $1,000 catch-up contribution for individuals aged 50 and older. Roth IRA income phaseouts range from $230,000 to $240,000 for joint filers and $146,000 to $161,000 for single filers. Traditional IRA deduction phaseouts in 2024 range from $123,000 to $143,000 for joint filers and $77,000 to $87,000 for single filers and heads of household.

Capital gains and qualified dividends

The tax rates for long-term capital gains and qualified dividends will remain the same (0%-15%-20%).

However, the income thresholds for these rates will increase in 2024. The 0% tax rate applies to taxable incomes up to $94,050 for joint filers, $63,000 for heads of household, and $47,025 for single filers. The 20% tax rate applies to taxable incomes starting at $583,751 for joint filers, $551,351 for heads of household, and $518,901 for single filers. Taxpayers with taxable incomes between the 0% and 20% breakpoints will fall into the 15% tax rate category.

Gift and estate tax exclusion.

The estate and gift tax exemption for 2024 is $13,610,000. If an estate comprises more than 35% of closely held businesses, up to $740,000 of tax can be deferred, and the IRS will charge only 2% interest. In 2024, each person can gift up to $18,000 ($36,000 if your spouse agrees) to any individual without having to file a gift tax return. Annual gifts over this amount will require filing a gift tax return, but no gift tax will be due unless your total lifetime gifts exceed $13,610,000.

Voyage Tax Consulting offers tax planning services that provide comprehensive benefits for individuals and businesses.

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