Fellow high-earning Americans, listen up! There’s some tax deduction drama heading this way next year. Currently, all of you fabulous 50-and-better workers can make catch-up contributions to your 401(k) accounts, up to a cool $7,500. But guess what? Starting January 1, 2024, that party could be shut down.
Those catch-up contributions might only be allowed in after-tax Roth accounts if you earn more than $145,000 annually. Congress wants you to pay more taxes upfront during your high-rolling years rather than during your retirement when you may be in a lower tax bracket.
However, there’s a silver lining! Roth accounts offer some tax diversification magic when you retire. You can tap into that money tax-free during those years when touching other accounts would have Uncle Sam reaching into your pockets.
Now, take note: this change only relates to your 401(k)s, not your IRA accounts. And some companies are asking Congress to hit the snooze button on this for a few years. They’re not quite ready to deal with the tax rule shake-up, and they’ve got some serious paperwork to sort out.
Here’s the deal: make the most of this year by maxing out those pre-tax 401(k) contributions while you still can! You might lose that sweet tax benefit of catch-up contributions next year. And hey, if all this tax talk has you scratching your head, call your Elevation Wealth Partners, and they’ll come to your financial rescue!
Source:
- Millions of high-earning Americans are slated to lose a popular tax deduction starting next year (Wall Street Journal)
The information provided here is for general informational purposes only and should not be considered investment advice. Elevation Wealth Partners does not provide tax advice. Clients should consult a professional tax advisor for their tax advice needs.
