Federal and State Taxes

Highlights of changes in Revenue Procedure 2023-34:

The tax year 2024 adjustments described below generally apply to income tax returns filed in 2025. The tax items for tax year 2024 of greatest interest to most taxpayers include the following dollar amounts:

401(k), IRA, HSA, FSA, Annual Gift Exclusion etc.

Under Secure 2.0 Act, enacted in December 2022, new catch-up contributions to 401(k), 403(b) or governmental 457(b) plan will be considered as Roth contributions for employees whose prior-year Social Security wages exceeded $145,000. The start-date of such a rule was originally January 1, 2024. IRS has extended the deadline to January 2026.

https://www.irs.gov/newsroom/irs-announces-administrative-transition-period-for-new-roth-catch-up-requirement-catch-up-contributions-still-permitted-after-2023

This ruling would have limited the choice for employees to contribute catch-up contributions for employees who are age 50 or over to Roth 401k only. Since Roth contributions are after-tax, the employees would be paying taxes on the catch-up contributions. However, Roth contributions have many benefits such as the amount grows tax-free and can be withdrawn tax-free during retirement.