Maximizing 2024: Year-End Financial Planning Opportunities to Consider
10/15/2024
10/15/2024
Most of us planner types are starting to worry about upcoming financial changes that may happen with a new President and Congress. There have been some “wild” campaign proposals put forth that, if enacted, would materially impact many businesses and investors. Recognizing that what is said on the campaign trail to rally votes doesn’t normally turn into law, we can remain somewhat calm about the prospects of an extreme makeover.
However, there is something that does need to be addressed by our newly elected officials. Provisions of the Tax Cuts and Jobs Act of 2017 (TCJA), one of the more substantial overhauls of the tax code, are set to sunset at the end of 2025. Among other things, the TCJA reduced tax rates for both businesses and individuals and doubled the estate tax exemption.
If allowed to sunset, tax brackets would shrink, the standard deduction would decrease, income tax rates would increase, and the alternative minimum tax (AMT) would increase. There’s a slew of other unfriendly tax things that would occur too, but you get the gist that businesses and individuals will be paying more. And when businesses pay more, they pass that cost on to us as consumers. Depending on how things shake out, some additional tax and estate planning might be required in 2025.
In the meantime, there are still some things to think about before we close out 2024. Here’s a list of year-end financial planning items to consider:
529 PLAN CONTRIBUTIONS
Contribute to a 529 education savings plan. You can gift up to $18,000 ($36,000 if married and filing jointly) per plan in 2024 and remain under the gift tax exclusion limit. Some states, like New York, may offer a tax benefit for contributions.
ROTH IRA CONVERSIONS
Consider Roth conversions. If you are in a lower tax bracket this year, but plan on being in a higher one when you need to start taking funds out of your qualified retirement accounts, believe that the government will increase tax rates in the future, or know that your beneficiaries will be in a higher tax bracket, it may make sense to convert some or all of your traditional retirement account to Roth. That involves paying taxes now but getting an account that will grow tax-free in the future.
CHARITABLE GIVING
Charitable gifts. If you’re looking to make charitable gifts and receive some tax benefit, you should consider the following:
As always, if you would like to talk through these year-end financial planning opportunities or any other strategies, please contact us.