As the holiday season approaches and life gets busier, now is a great time to consider some financial moves to finish the year in a strong position and start 2025 on the right foot.
Many of these moves depend on your income. If you’re younger than 73, you don’t need to worry about taking required minimum distributions (RMDs) yet. But if you’re 73 or older, it’s important to ensure you’ve withdrawn the required amount from your retirement accounts. For those with multiple IRAs, there are special RMD “aggregation rules” allowing you to calculate the RMDs separately for each IRA—whether it’s a traditional, SIMPLE, or SEP IRA—then add them up and withdraw the total from any one or more of your IRAs. However, RMDs from 401(k)s and other employer-sponsored plans must be taken separately.
Of course, if you are still working and haven’t maxed out your retirement contributions, consider adjusting your paycheck to increase your 401(k) contribution for the year or making your 2024 IRA contribution before the tax filing deadline.
You may also want to consider tax-loss harvesting. If you have investment losses, you can use them to offset gains and up to $3,000 of ordinary income. Losses that exceed your gains and $3,000 can be carried forward to offset future gains or income in later years. Be mindful of the wash sale rule: if you sell a stock at a loss, you cannot repurchase the same or a substantially identical stock within 30 days, or the sale won’t count for offsetting gains. Alternately, if you have losses carried forward, consider recognizing gains on investments you want to sell.
Additionally, review your medical expenses for the year. Medical costs are only deductible after they exceed 7.5% of your adjusted gross income, so if you’re close to that threshold, consider scheduling medical procedures before year-end. Out-of-pocket expenses for procedures like rotator cuff repairs or hip replacements might help you exceed the threshold and qualify for a tax deduction.
For charitably inclined individuals, donor-advised funds (DAFs) allow you to make a donation and receive a tax deduction now, while giving you time to decide on a charity. The gift itself doesn’t need to go to the charity in the same year as the tax deduction. You can also donate highly appreciated assets to a DAF or directly to a charity, which lets you avoid capital gains taxes on the asset. If you’re 70½ or older, you might consider a qualified charitable distribution (QCD) directly from your IRA to a qualified charity—but not to a DAF—up to $105,000. QCDs can also satisfy your RMD for the year, and you can choose to make a QCD for only part of your RMD. However, QCDs reduce taxable income rather than generating a charitable deduction.
If you’ve had a low-income year, perhaps because you’re retired but not yet taking RMDs, consider Roth conversions. By converting now, you might pay lower taxes today and allow the funds to grow tax-free for future withdrawals. Roth conversions can also reduce your RMDs later. Working with a CPA can help you maximize your tax bracket, potentially paying a lower tax rate today than you would when RMDs begin.
These are just a few of the moves you may want to consider before the end of the year. If you have questions on what financial or tax moves may benefit you, the experts at Henssler Financial will be glad to help:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166
Listen to the November 9, 2024 “Henssler Money Talks” episode.
This article is for demonstrative and academic purposes and is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
