As 2024 draws to a close, it is crucial to schedule a meeting with your tax advisor to discuss year-end tax planning. To help you prepare, we have updated our checklist with considerations and action steps for 2024, along with a look ahead to 2025. Cherry Bekaert’s team of tax advisors is eager to assist you, your family and your business.
Consider the following questions and considerations to assist with your 2024 tax planning.
Questions To Begin Your 2024 Planning
Before you start on your 2024 taxes, take the time to answer the following questions to help you determine what life events could impact your filing:
- Have you experienced significant life changes this year, such as marriage, divorce, retirement, relocation, job changes or new family members?
- Have there been significant transactions this year, such as new investments, inheritances, casualty losses, or business successes or failures?
- What capital gains or losses can be realized before year-end?
- Do you make charitable contributions?
- Do you receive income from a pass-through business?
- Are there any carryover losses, deductions or transactions from 2023?
- How will your income change in 2025?
Develop Your Tax Planning Roadmap
Consider the following tasks to further build out your 2024 year-end tax strategy. Any actions that apply to your situation can be added to your own planning checklist:
- Defer income and accelerate deductions where possible.
- Generate or match losses with gains.
- Manage income classification (Ordinary vs. Capital, Passive vs. Active).
- Review the basis in S corporation stock and partnership interests to allow for losses.
- Accelerate investments in operating assets eligible for 60% bonus depreciation in 2024.
- Engage a cost segregation study for real estate to accelerate depreciation deductions.
- Consider gain deferral by investing in a Qualified Opportunity Zone Fund.
- Evaluate like-kind exchanges for real property transactions.
- Calculate potential Section 199A deductions to business structuring.
- Assess the potential impact of the Alternative Minimum Tax (AMT) and Net Investment Income Tax (NIIT).
- Acquire and claim tax credits.
- Consider making discretionary trust distributions to take advantage of lower individual tax rates. The fiduciary top tax rate is 37% on income over $15,200, while individual rates vary.
- Evaluate the impact of 2025 income/deductions on actions in 2024.
Tax Planning With Retirement Savings
These are potential areas to focus on to prioritize your retirement savings:
- Maximize contributions to Individual Retirement Account (IRA), profit sharing, 401(k) and employer retirement savings plans.
- Age limits do not limit contributions to traditional IRAs. Income limits may limit deductibility.
- Individuals reaching age 73 in 2024 must take their first required minimum distribution (RMD) by April 1, 2025.
- RMDs from inherited IRAs may not be necessary in 2024.
- Individuals aged 70 ½ or older can make qualified charitable contribution distributions from IRA funds of up to $105,000 in 2024, which can include a one-time transfer of $53,000 to a split-interest charitable trust.
- Convert traditional IRA or qualified plan amounts to a Roth IRA for future tax-free earnings and no RMDs. Tax is due on the conversion.
Gifts and Estate Planning
Determine if you should potentially add these items to your 2024 tax checklist, if you want to focus on gifts and estate planning:
- Consider gifts to family and others, choosing assets with depressed values to shift appreciation out of your estate to donees.
- Maximize the use of the lifetime exclusion.
- Consider the form of gifts, whether outright, in trust, or under Uniform Transfers to Minors Acts (UTMA).
- Make direct payments to institutions or medical service providers for tuition and medical expenses on behalf of others.
- Frontload gifts to Section 529 plans and Achieving a Better Life Experience (ABLE) accounts with up to five years’ worth of annual gift exclusion.
- Refresh your estate plan and accelerate transfers now while the lifetime exclusion is high.
- Review trust documents older than five years, so they still align with current family goals and comply with legal changes.
- Make charitable contributions using trust strategies like charitable remainder annuity trusts and unitrusts. Consider donating long-term appreciated stock.
Advice for Final 2024 Tax Payments
When it comes time to make your 2024 tax payment, don't forget to confirm the following:
- Withholdings and Estimated Taxes: Review year-to-date income tax withholding and estimated taxes to avoid underpayment penalties or overpayment in April 2025.
- Adjustments: Consider adjusting tax withholding from wages or IRA RMDs to better align with your tax liability.
- Electronic Payments: Make electronic deposits of federal and state tax payments for convenience and accuracy.
- 2025 Estimated Payments: Consider calculating first-quarter 2025 estimated tax payments to stay ahead of your tax obligations.
Cherry Bekaert Is Here To Guide You Forward
Reach out to your Cherry Bekaert tax advisor to initiate your year-end tax planning or for help with any questions related to the checklist above.
