Let’s Talk Taxes

🚀 What’s happening: Changes in the tax code are coming this year that are worth paying attention to (don’t worry we’ll keep it snappy):

Social Security is changing.

Employees paying Social Security tax are going to see an increase this year (fwiw they go up every year about in line with wage growth, so this one is not really new). The top rate is moving up about 5% or $521/year coming out of your paycheck.

For our readers who are already drawing Social Security, congrats your getting more money in 2024. Your cost of living adjustment (COLA) will be +3.2% higher in 2024 from 2023 which on an individual basis works out to an extra $59/month or $705/year.

Your 2024 tax refund won’t change.

If you saw a big drop in your tax refund in 2023 you aren’t alone. Most people did due to the expiration of several pandemic-related policies. This year though, don’t expect a similar change.

In fact, experts are predicting that 2024 will see an average tax refund of about $2.9k— which is about the same as 2023. The timing of refunds is also likely to be similar so you shouldn’t expect any delays (but of course… it’s the government… so no promises).

Remember your child tax credit.

Yes you get some small relief for those little people running around your house in the form of the Child Tax Credit. No, it’s probably not going to allow you to pay for everything they broke this year. In 2023, the Child Tax Credit is $2,000 per child age 17 or younger.

It’s worth noting though that the credit is subject to a phase-out (i.e. its going away) starting at joint filers who earn $400,000 or more and single filers who earn $200,000 or more.

IRA and 401(k) limits are slightly higher this year.

If you have any of these retirement accounts you can contribute more this year than last year (if we lost you at IRA, here is a simple guide). The traditional IRA and Roth contribution limits in 2023 for individuals is up to $6,500 to an IRA, and those age 50 and older also qualify to make an additional $1,000 catch-up contribution.

In addition, the 2023 contribution limits for tax-deferred 401(k)s and Roth 401(k)s have increased to $22,500. If you're age 50 or older, you qualify to make an additional $7,500 catch-up contribution for this tax year as well.

Watch out for new tax brackets coming in 2024.

Tax brackets are adjusted slightly higher each year, but largely due to recent inflation numbers, the IRS just announced the second highest increase in the past 30 years for 2024 (so this one will apply to your 2025 taxes).

Tax brackets for 2024 are moving up by 5.4%… so for example the new joint filer threshold for 24% federal rate means you have to have income over $201,050 vs. the previous threshold of $190,750. Bottom line, these new brackets will likely allow you to take home more of your pay.

👪 Closer to home: We generally side eye most taxes because we know these dollars are abused and wasted by politicians (did you know the U.S. didn’t actually have an income tax until 1913?), but it’s better to be informed.

Lastly a disclaimer, we aren’t tax accountants ourselves so use the above as a starting point with your own professionals (or Turbo Tax) to ask questions and get more details on your specific situation.