By Damien Hanly, Senior Partner
As we enter into the final months of the 2024 year, it is wise to begin thinking about year-end tax planning and charitable giving. Having a basic understanding of the complex concepts and changing tax rules will allow you to make better-informed decisions regarding your financial future – and may also help reduce your tax burden next April. There has been changes to annual amounts from the prior year that can add benefits for you. Here are a few tips to get started.
- Required Minimum Distributions (RMD’s): Confirm with your tax advisor that you have withdrawn the appropriate amount to meet your RMD requirements if over age 73 before year-end.
- IRA Charitable Donation: If you are over 70½ and would like to make a donation to charity from your IRA, you can donate up to $100,000 each year directly to qualified charities using a Qualified Charitable Distribution. You avoid taxes through a direct transfer of funds from your IRA custodian to qualified charities. It is an effective way to direct your required minimum distribution.
- Bunch your itemized medical expenses: Investigate bunching one’s medical expenses in the same year in order to meet the threshold percentage of your adjusted gross income to claim such deductions. Generally, you can deduct only the amount of your medical and dental expenses that is more than 7.5% of your AGI. But, if you can push any of those regular expenses into the following year, you may have more than 10% of your AGI in expenses in one year, instead of 7.5%.
- 529 Plans: Revisit contribution amounts to your 529 education savings plan accounts.
- Harvest gains & losses: Harvest losses by selling taxable investments. Similarly, harvest your gains by selling taxable investment if you have capital loss carryovers or year-to-date losses for the current year. Short-term losses are most effective at offsetting capital gains. Note: wait at least 31 days before buying back a holding sold for a loss to avoid the IRS wash sale rule.
- Max out your retirement account contributions. For 2024, the maximum allowable 401(k) contributions are $23,000; if you’re age 50 or older you can make an additional $7,500 “catch-up” contribution. For IRAs, you can contribute $7,000; those over age 50 can contribute an additional $1,000 via the catch-up provision.
- Health Savings Account (HAS): If you have an HAS, consider maxing out contributions to that account as well, currently $4,150 for individuals, $8,300 for families, plus an additional $1,000 catch-up contribution for those over age 55. Also, confirm you’ve spent the entire balance in your Flexible Spending Accounts for the year.
- Federal annual gift tax exclusion: Consider using your federal annual gift tax exclusion amount ($18,000 per donee) for cash gifts or to fund 529 Plans. Make sure that your estate plan is up to date, and that you have a will, revocable trust, health care directive and power of attorney in place.
- Alternative Minimum Tax (AMT): If you have concerns that you may be subject to the AMT, speak with your CPA or other tax advisor before deferring or accelerating income and/or deductions, as your AMT status could limit your ability to benefit from these actions.
- Be aware of the increased availability of residential clean energy tax credits. https://www.irs.gov/credits-deductions/residential-clean-energy-credit
- Be sure to alert your CPA or tax preparer if you have income or gains from cryptocurrency in 2023.
- Make sure that your estate plan is up to date, and that you have a will, revocable trust, health care directive and power of attorney in place.
Resources
- RBC Nexus
- https://www.irs.gov/newsroom/qualified-charitable-distributions-allow-eligible-ira-owners-up-to-100000-in-tax-free-gifts-to-charity
- https://www.irs.gov/publications/p502#:~:text=555%2C%20Community%20Property.-,How%20Much%20of%20the%20Expenses%20Can%20You%20Deduct%3F,than%207.5%25%20of%20your%20AGI.
- https://www.fidelity.com/learning-center/personal-finance/wash-sales-rules-tax#:~:text=The%20wash%2Dsale%20rule%20prohibits,year%20higher%20than%20you%20hoped.
- https://www.irs.gov/newsroom/401k-limit-increases-to-23000-for-2024-ira-limit-rises-to-7000#:~:text=Highlights%20of%20changes%20for%202024,to%20%247%2C000%2C%20up%20from%20%246%2C500.
- https://www.irs.gov/newsroom/irs-reminds-those-aged-73-and-older-to-make-required-withdrawals-from-iras-and-retirement-plans-by-dec-31-notes-changes-in-the-law-for-2023#:~:text=IRAs%3A%20The%20RMD%20rules%20require,take%20withdrawals%20during%20their%20lifetime.
- https://www.irs.gov/pub/irs-dft/p969–dft.pdf
- https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes
Investment advisory services offered through Beacon Global Advisory Network, LLC. Rosefinch is neither an affiliate nor a subsidiary of Beacon Global Advisory Network, LLC.
