Year-End Tax Planning

While tax season is still several months away, year-end will be here before we know it. With that in mind, it’s important to make sure you’re taking advantage of the tax-planning strategies that make sense for your unique situation. Here’s a short list of topics we’ll be discussing with our clients over the next few months:

 

• Retirement Account Contributions – Have you maximized contributions to employer plans or IRAs yet for 2024? If you haven’t and plan to, you’ll need to make sure elective deferrals to employer plan are maximized before 12/31. However, you have until the filing deadline for IRA contributions.

 

• Required Minimum Distributions (RMDs) – There have been significant changes to the rules around Required Minimum Distributions over the last few years, and even more specifically, RMDs for inherited accounts. Depending on your age and when you might have inherited an account, there could be planning opportunities regarding how much you take before year-end.

 

• Roth Conversions – If 2024 is likely to be a lower income year for you compared to future years, Roth conversions might make sense. Ideally, this strategy would allow you to convert pre-tax assets at a favorable income tax rate now to allow tax-exempt growth and distributions in the future when your income tax rate might be higher.

 

• 529 Plan Contributions – If you are planning to help your children with future educational expenses, the best place to save for that goal is a 529 plan. Contributions up to $10,000/year (joint tax return) are tax deductible on your New York State tax return. These contributions are due by 12/31.

 

• Annual Gifting – Each year, individuals can gift up to $18,000 to another person without needing to file a gift tax return. This can be an effective way to reduce your eventual estate tax liability. For example, an older couple could give their child and child’s spouse a combined $72,000 in 2024 without generating a taxable event for either couple.

 

These are just a few of the many tax planning strategies we help our clients consider on an annual basis. To optimize your tax picture for 2024 and beyond, contact a Rockbridge advisor today.