2024 Tax & Estate Planning Update - Inlet Private Wealth

• Annual gifting limit – the limit on tax-free gifts will be $18,000 in 2024, up from $17,000. These gifts do not count toward one’s lifetime gifting exclusion maximum and neither the giver nor the receiver is taxed. If one wants to help a child/grandchild with education, they can make a lump sum contribution to a 529 plan of up to five times the exclusion, or $90,000.  A married couple could set up a 529 plan for $180,000.

• As of October 1, 2023, the IRS started charging 8% interest on estimated tax underpayments, up from 3% previously.

• Due to inflation, the threshold for tax brackets will increase by 5.4% in 2024, the second largest increase in the past three decades.

• Gift/estate tax exclusion – in 2024 the gift/estate tax exclusion will increase to $13.61 million.  However, the current law has a sunset provision that will reduce the exemption to approximately $7 million beginning January 1, 2026.  Planning for a lower exemption is critical.  We encourage you to discuss your estate plan with your attorney and/or Inlet Private Wealth to strategize as there are several creative strategies that can be incorporated in your estate plan such as making sure your estate involves setting up a credit shelter trust and/or the utilization of other estate planning tactics such as grantor retained annuity trusts (GRATS), defective grantor trusts, spousal lifetime annuity trusts (SLATS), and the establishment of dynasty trusts for your family.

• The 2024 limit for 401(k) contributions has been increased to $23,000 for employees. If one is 50 years or older, they can contribute an additional $7,500 in catch-up contributions, raising the total employee contribution limit to $30,500 for 2024.

• The IRA contribution limit for 2024 has been increased to $7,000 for individuals under the age of 50 and to $8,000 for those age 50 or older.

• Qualified Charitable Deductions (QCD). Individuals over 70.5 are permitted to transfer up to $100,000 a year from their traditional IRA directly to a qualified charity, tax-free (even if they are not itemizing their deductions). QCD’s from an IRA count toward and individual’s required minimum distribution and excluded from one’s taxable income. Married couples filing jointly can donate up to $200,000 annually.

• Charitable Giving: Americans gave $499.33 billion during 2022 ($1.37 in donations per day), down -3.4% from 2021. Of this amount, individuals gave $319.4 billion, representing 64% of all charitable giving and mega-gifts by individuals of $450 million or more totaled $14 billion. More than $45 billion was given via gifts in a will or trust, an increase of 2.3%. Giving to overseas charities increased noticeably during 2022, likely in response to Russia’s aggression in Ukraine (Financial Advisor Magazine).