Year-End Tax and Financial Planning: What You Need to Know

As 2024 draws to a close, now is the time to assess your tax and financial plans. With potential changes on the horizon, including the sunset of several provisions from the Tax Cuts and Jobs Act (TCJA), it’s essential to prepare for the year ahead. Our latest blog post will summarize these updates and help you think about strategies to reduce your tax burden and secure your financial future.

Here’s a closer look at key topics to consider as you plan for year-end:

Traditional Year-End Tax Planning

While no significant changes in income tax rates are anticipated for 2025, traditional strategies like deferring income and accelerating deductions remain effective. Specific deductions to evaluate before year-end include:

• IRA and HSA contributions
• Medical expenses, state and local taxes, mortgage interest, and charitable donations

Optimizing these deductions can help maximize your tax savings.

Upcoming Expiration of TCJA Provisions

Key benefits from the TCJA are set to expire at the end of 2025. Unless Congress extends these provisions, tax changes could impact your finances beginning in 2026. We’re keeping watch on legislative developments and will post updates if things change.

The Business End

Here are some year-end considerations for business owners:

Deferring Income and Accelerating Expenses

Deferring or accelerating income or prepaying or deferring expenses may be strategies that can reduce your taxes. In terms of property and equipment purchases, for example, you might benefit from making those transactions before the end of the year—many purchases can be completely written off by businesses in the year they are placed in service. Plus, there are rules that permit certain property improvements to be depreciated over a 15-year period and, therefore, also qualify for 60% first-year bonus depreciation. It’s important to consider the timing of your capital purchases. We can help you determine when to pull the trigger.

Business meals

As you enter the holiday season and have more social gatherings with your customers and employees, keep in mind the rules for business meal deductions. There are circumstances where certain business meals may qualify for a 100% deduction. Properly categorizing your expenses is important. Contact us if you need advice.

Net operating losses (NOLs)

If your deductions for the year are more than your income for the year, you may have an NOL. In general, you can use an NOL by deducting it from your income in other year(s), but it is limited to 80% of your taxable business income in any one year. We can advise you on any potential tax benefits and limits.

Energy Tax Credits

Going green has its advantages, thanks to expanded tax incentives from the Inflation Reduction Act of 2022. Homeowners and businesses can benefit from credits for:

• Solar panels
• Energy-efficient home improvements (e.g., windows, insulation, and heat pumps)
• Electric vehicles (EVs)

Be sure to explore eligibility requirements to maximize these credits.

Beneficial Ownership Information (BOI) Reporting

If you own certain business entities, new reporting requirements under the Corporate Transparency Act (CTA) may apply. This reporting, submitted to FinCEN, is mandatory for entities existing before January 1, 2024, and must be completed by January 1, 2025. Note: This is not a tax filing but a compliance requirement with significant penalties for noncompliance.

Personal Year-End Planning Considerations

Aside from business factors, here are more areas to review before the year ends:

• Life events: Marriages, divorces, births, deaths, or major purchases may have tax implications.
• Capital gains and losses: Harvest losses to offset gains and reduce taxable income.
• Retirement savings: Evaluate contributions to IRAs, Roth IRAs, and 401(k) plans.
• Required minimum distributions: If you’re over the RMD age threshold, ensure you withdraw the required amounts to avoid penalties.
• Estate and gift planning: Use annual exclusions to save on future estate taxes.
• Education savings: Maximize tax advantages through 529 plans.
• Estimated taxes: Review withholding and payments to avoid underpayment penalties.

 Charitable Contributions

Charitable giving offers meaningful tax benefits. Consider these strategies:

• Donate appreciated assets: Avoid capital gains taxes while claiming a deduction for the fair market value.
• Establish a Donor-Advised Fund (DAF): Make a tax-deductible gift now while distributing funds to charities over time.
• Qualified Charitable Distributions (QCDs): If you’re 70½ or older and don’t typically itemize deductions, using QCDs to satisfy your required minimum distributions (RMDs) can be a tax-efficient option.

Remember to maintain proper documentation, including a confirmation letter for donations of $250 or more.

Digital Assets and Cryptocurrency

The IRS continues to examine digital assets like cryptocurrencies and NFTs. If you transact in digital assets, you may need to address tax implications such as capital gains or losses. Additionally, you might benefit from using safe harbor provisions to allocate unused basis before year-end.

Planning Now for Better Results

Proactive year-end planning helps minimize your tax burden and avoid surprises when it’s time to file. Call us to request planning services, such as a year-end review and/or tailored tax planning. We’re here to help.