Facing a future emergency? Two new tax provisions may soon provide relief
- ByPolk & Associates
- Nov, 01, 2023
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Perhaps you’ve been in this situation: You’re facing an emergency and need some cash. You consider taking money out of a traditional IRA or 401(k) account but if you’re under age 59½, distributions are taxable and generally subject to a 10% penalty. Good news: Beginning in 2024, there will be relief for some employees facing emergencies. The SECURE 2.0 law contains a provision that allows employers with 401(k)s and 403(b)s to offer pension-linked emergency savings accounts to non-highly compensated employees. Contributions will be limited to up to $2,500 a year and will be included in taxable income, but participants won’t have to pay tax when making withdrawals. Other rules apply.
The Social Security wage base for employees and self-employed people is increasing in 2024
- ByPolk & Associates
- Nov, 01, 2023
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In a recent announcement, the Social Security Administration revealed that the wage base for computing Social Security tax will increase to $168,600 for 2024 (up from $160,200 for 2023). Wages and self-employment income above this threshold aren’t subject to Social Security tax. The Federal Insurance Contributions Act imposes two taxes on employers, employees and self-employed workers. One is for Social Security tax, and the other is for Medicare tax. There’s a maximum amount of compensation subject to the Social Security tax, but no maximum for Medicare tax. For 2024, the FICA tax rate for employers will be 7.65% — 6.2% for Social Security and 1.45% for Medicare (the same as in 2023).