As we reflect back on 2023, there was no shortage of news and scenarios related to the U.S. economy and personal finance. Interest rates, inflation, housing prices and a turbulent political landscape were among the many issues important and relevant to taxpayers. Tax season once again warrants the gathering of records and important statements in order to file your income taxes. This is also a great time to revisit your financial, retirement and estate planning goals as well as important documents. As you consider these for yourself and your family, we’d like to provide some ideas, tips and trends from the financial planning world that might be relevant for you.
Education Planning & 529-to-Roth Rollovers
Saving for college is an important commitment and worthy of special consideration, especially as undergraduate enrollment has steadily declined in recent years, mainly due to the impact of the pandemic and rising college tuition. To aid in the savings process, many families consider the 529 plan which is an investment account offering tax-free withdrawals and other benefits when used to pay for qualified education expenses. Thanks to a provision in the Secure Act 2.0, should the account hold unused funds at the end of the college process, account owners can roll over up to $35,000 into a Roth IRA in the beneficiary’s name. This represents the lifetime limit per beneficiary and these provisions are in effect starting in 2024.
Additional restrictions are outlined in these new regulations, so please feel free to reach out to us for more information.
Inflation Indexing for QCDs
Qualified charitable distributions (QCDs) allow a taxpayer who is age 70½ or older to distribute up to $100,000 annually from a traditional IRA to a qualified public charity. Such a distribution is not taxable and can be used in lieu of all or part of an RMD. Beginning in 2024, the QCD amount is indexed for inflation, and the 2024 limit is $105,000. The Secure Act 2.0 created an opportunity (effective 2023) to use up to $50,000 of one year’s QCD (i.e., one time only) to fund a charitable gift annuity or charitable remainder trust. This amount is also indexed to inflation beginning in 2024, and the limit is $53,000.
The Secure Act 2.0 provides for many other savings options in 2024. We would be happy to meet with you to break these down further, as well as explore the many other facets of financial planning that may be on your mind as this new year gets underway. Let us assist you with updating your estate planning documents, navigating the new FAFSA form or planning for the sunsetting tax laws in 2025.
Contact Lisa Mrkall, CPA, MBA, Partner at 716.633.1373 or lmrkall@tsacpa.com.
