Effective financial planning requires staying up-to-date with the ever-changing tax landscape. As we look ahead to 2023, 2024, and 2025, several significant tax changes are expected to take place, including updates introduced under the SECURE Act 2.0 from 2022 as well as Tax Cuts and Jobs Act from 2017. In this article, we will summarize these changes and provide you with valuable insights to help you navigate the evolving tax environment and make informed financial decisions.
- Effective at the start of 2023, the age at which minimum required distributions begin from retirement accounts is not 73 (up from previously 70 ½). Starting in ten years, that age will be further pushed back to age 75.
- Penalties for failing to take your required minimum distribution are cut in half in 2023 and further reduced if you promptly correct the error.
- Now in 2023, employers can amend retirement plans to allow matching employer contributions to be made as Roth instead of pre-tax if the employee elects.
- As of now newly created retirement plans will be required to automatically enroll employees at a contribution rate of at least 3%, although employees can opt-out. Certain companies that have been in business less than three years or have less than 10 workers are exempt. Beginning in 2025, new retirement plans will also include an auto escalation feature to increase that contribution rate over time for employees.
- Those over age 50 have higher catch-up contribution limits to retirement plans – from $6,500 to $7,500 per year as of 2023. By 2025, that catch up contribution will be raised to $10,000 for those age 60 to 63 and those making over $145,000 will have to make their catch-up contribution as Roth rather than pre-tax.
- Workplace retirement plans also have a new requirement that part-time workers, or those who work between 500 and 999 hours for three consecutive years, must have access to the workplace retirement plan. Beginning in 2025, that timeframe is further reduced to 2 years.
- Beginning in 2024, up to $35,000 in leftover 529 College Savings Plans may be rolled over to Roth IRAs for the beneficiary as long as the 529 Plan has been open for at least 15 years.
- Additionally in 2024, retirement plan administrators are allowed to make matching contributions into employee retirement accounts to match payments made on student loans.
- Most notably the federal estate tax exemption amount is scheduled to drop off after 2025. For 2023, the gift and estate tax exemption is $12.92 million ($25.84 million per married couple). By 2025, the changes made under TCJA will sunset and cut the exemption by almost 50%. Now is the time to think about proactive estate planning techniques to move assets to the next generation in a timely and tax efficient manner.
Staying informed and adapting your financial plans to the changing tax landscape, including updates introduced under the SECURE Act 2.0 and the Tax Cuts and Jobs Act, is essential for long-term financial success. As we move into 2023, 2024, and 2025, we help clients remain vigilant about proposed tax changes and their potential impact on income, investments, retirement savings, and education expenses. Consult with us at Hollow Brook to evaluate your specific circumstances and develop a tax-efficient strategy that aligns with your financial goals. By proactively planning, you can minimize tax liabilities and position yourself for financial well-being in the years ahead.
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Disclaimer: Information provided is for educational purposes only. HBWM does not provide tax, legal, compliance, or accounting advice. In considering this material, you should discuss your individual circumstances with professionals in those areas before making any decisions. Further, HBWM makes no warranties with regard to such information, or a result obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information.