HERE’S A QUICK LOOK at the world of taxes:
- The tax code was revamped in 2017—the most extensive rewrite since 1986. Most of the 2017 tax cut went to corporations. The new law has been a mixed bag for individuals, who now enjoy lower tax rates but also lost valuable deductions. Most households have seen their tax bill decline, but a significant minority are paying more. Despite hopes that the tax code would be simplified, that goal proved elusive. The tax code remains littered with a flabbergasting array of special taxes, deductions, credits and tax-favored savings accounts.
- The standard IRA contribution is $6,500 in 2023 and $7,000 in 2024, while the contribution limit for 401(k) plans is $22,500 in 2023 and $23,000 in 2024.
- Thanks to 2022’s tax law, the age at which required minimum distributions must begin is rising. For those born between 1951 and 1959, the new starting age is 73, up from 72 under the old rules. For anyone born after 1959, it will be 75.
- A third of all private sector workers don’t have access to an employer-sponsored retirement plan, whether it’s a traditional pension plan or a 401(k) plan. For these workers, it’s especially important to contribute to an IRA and to fund a regular taxable account.
- An estimated 57% of households didn’t pay any federal income tax in 2021, according to the Tax Policy Center, which is a joint venture of the Urban Institute and Brookings Institution.
- For all taxpayers, the average federal tax rate in 2019 was 12.3% of total income, according to IRS figures.
- New York, Hawaii and Maine have the highest total state tax burden, while Alaska, Tennessee and Delaware have the lowest, according to WalletHub. The ranking considers property taxes, individual income taxes, and sales and excise taxes.
- Where does the federal government’s revenue come from? Individual income taxes account for 51%, Social Security and Medicare taxes 31% and corporate income taxes 9%.
Next: Income Tax Basics
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