Santa’s set to make his annual visit in just a few short weeks. And if I’ve analyzed my sources correctly, I estimate he should be on his second check of the naughty-or-nice list right about now (I’m assuming you made it onto the latter, of course).
I’m right there with you – feeling the chaos that comes with the last few weeks of the business year (and the holiday madness on top of that). But here’s the deal: 2024 is STILL packed with tax opportunities that can really save you money. And the clock is ticking.
So while Santa might be double-checking his list, right now is the time for YOU to be double-checking your EOY tax planning list (provided for you below, of course – an early Christmas gift from us to all of our Houston contacts).
And if you aren’t in the habit of double-checking your EOY tax planning list (or making one at all), I’d suggest you start mimicking Santa’s ways beyond those extra cookies you’ve been downing each time you pass the break room.
Because we’ve got a new president stepping into office, and he’s already (as per usual) being a bit of a wild card – making somewhat grand pledges regarding issues like tariffs and tax cuts, but not guaranteeing anything for sure (or acknowledging the possible consequences involved).
So, that’s the situation we’re entering 2025 with – a lot of unpredictability and not many solid answers. Cheers to the new year!
To come out on top here, you need to use what’s left of 2024 to lock in as many tax benefits as possible. Because it’s the choices you make NOW that determine how you step into 2025 – set up to crush your goals or struggling to even get on your feet. It’s up to you.
Postal Plus, Tax & Bookkeeping Services’s 2024 End-of-Year Tax Planning Checklist
“Plans are nothing; planning is everything.” – Dwight D. Eisenhower
As the trustworthy Houston tax pro in your corner, it’s my job to keep you thinking ahead when it comes to your taxes. At the end of the year, that means encouraging you to make smart moves with the few fast-paced weeks that we have left in the year.
Of course, you should aim to make smart tax moves with every end-of-year cycle, but especially this year now that the White House has a new resident (who could upend tax legislation for you).
So, here’s your own personal guide to soaking up all the tax advantages you can before 2025: EOY tax planning — Trump administration edition.
Time your income and deductions
Income taxes are rumored to stay the same or decrease with the Trump administration (but of course, there’s no guarantee). On the off chance Trump does enact tax cuts in 2025, the best strategy is to defer income into next year where you can. Some ways you can do that are:
Delay collections: If you’re self-employed, push income into next year by holding off on collections as long as you can.
Delay bonuses: Ask your employer if you can put off any bonuses coming your way until next year (it’s not guaranteed they’ll agree, but it’s worth the ask).
Postpone paychecks: If your employer was agreeable to delaying a bonus, you might ask them for another favor – deferring part of your salary or other compensation to 2025.
Hold on to incentive stock options (ISOs): By delaying exercise or sale, you sidestep taxes on both income and gains – for now.
Maximize retirement contributions: On that front, more juicy details are below.
Optimize retirement contributions
A new administration could mean changes in retirement account contribution limits, or different deductions for your 401(k) or IRA. So, you’ll want to contribute as much as you can before year-end for your 401(k) contributions and by April 15 for IRA contributions.
For 2024, you can put up to 23k into your 401(k). And if you’re 50 or older, you can be even more productive by using catch-up contributions (which allow you to contribute an extra 7.5k). Or, if you have a traditional or Roth IRA, the limit is 7k (or 8k for those of you 50 or more years young thanks to the 1k cost of living adjustment).
Another thing to consider: The potential expiration of TCJA provisions could mean higher tax brackets starting next year (although, Trump will likely push to extend them). But if they do end up expiring, you’ll want to consider pivoting your savings strategy. Roth accounts might become the optimal choice since contributions are taxed now, but withdrawals will be (gloriously) tax-free when you retire.
Estate planning
End of year is the time to review those will and estate documents (and update them if 2024 has held any life-altering events for you). And equally as crucial, you’ll want to make sure you’re taking advantage of gifting tax advantages.
Because of the TCJA, the federal estate and gift tax exemption jumped from 5.49 million per individual to its current rate of 13 million (or 27 million for married couples) – which could change in 2025, as the fate of the TCJA provisions is TBD.
The best move here is to transfer wealth while the exemption rate is high. There’s also the 2024 annual gift exclusion to consider, which allows you to gift 18k per individual (or 36k for married couples) without denting your lifetime exemption.
Consider making gifts of cash, appreciated securities (to take advantage of a lower capital gains tax rate for the recipient), or funding a 529 plan (to boost college savings).
Capital gains and losses
Although nothing is for certain, the Republican administration’s Project 2025 calls for a 15 percent long-term capital gains tax rate (down from the current 20 percent).
If this happens: Consider delaying the sale of your appreciated assets as we wait to see if the rate will drop (but of course consult your financial advisor, just in case).
You’ll also want to harvest your 2024 losses. Offsetting gains in a higher-tax-rate year (2024) with losses can minimize your taxable income, and unused losses can help offset gains in 2025. Sell your underperforming investments and carry forward any losses over 3k by applying them to a future (hopefully, less tax-heavy) year.
And of course, with end-of-year festivities comes a little portfolio housekeeping – make sure your portfolio is still in line with your broader, long-term financial goals, and re-adjust if needed.
Charitable giving
The goal here (you probably guessed it): Take advantage of the current 2024 tax advantages. Which, in the area of charitable giving, is the current standard deduction – 14.6k for individuals and 29.2k for married filing jointly.
One way to do this is with a bunching strategy: Consolidate multiple years’ worth of charitable donations into 2024 to exceed the standard deduction threshold (which allows you to itemize and benefit from the charitable deduction).
For example: Instead of donating 10k per year over three years to your charity of choice, you’d contribute 30k to a Donor-Advised Fund this year and distribute the funds as you like in the future.
End-of-year tax planning is even more complicated than normal this year, with the new administration to think about. Nobody knows for sure what will happen in the tax world in 2025, but one thing you can count on: My Harris County team and I will do our best to keep you in the know. And if you need help with any of these tax planning strategies, we’re here to help:
calendly.com/postalplustax
Merry tax planning,
Dominic Nguyen, CPA