Your 2024 Year-End Planning Checklist

With election day behind us and the frantic holiday season fast approaching, you might want to check your financial to-do list before you’re swept away by other pressing matters. As we’ve shared previously, many aspects of financial planning warrant annual review. It is essential to ensure you are not missing any crucial deadlines and are optimizing where possible.

In order to simplify your year-end review and help keep you on track to achieve your goals, we have compiled the following financial checklist. As always, we suggest working with your CPA before making any significant changes to your strategy.

Philanthropic Considerations

As a reminder, there are several ways to make gifts to charity: Donations in-kind, such as household items, clothing, and food; cash, including payments by check or credit card; and appreciated publicly traded securities. Donations of appreciated publicly traded securities should be shares held for over one year and can be donated directly to the charity, including to a Donor-Advised Fund or Private Foundation.

Evaluate your charitable gifting options

• Taxpayers who itemize deductions may deduct up to 60% of their adjusted gross income (AGI)¹ for charitable contributions made with cash to public charities. Contributions exceeding that amount can be carried forward for up to five years.
• By comparison, gifting appreciated non-cash assets held for more than one year offers an additional tax benefit in that you will not pay capital gain tax on the appreciation of these holdings. The deduction for this type of donation is limited to 30% of AGI (20% if made to a Private Foundation).
• Bunching, or grouping multiple years of charitable gifts into a single year can allow for a bigger tax deduction in years with higher income. It can also allow you to itemize deductions in the years in which you bunch your charitable gifts to receive the tax benefit of the contribution and take the standard deduction in years in which you do not bunch or make charitable contributions.
• Individuals aged 70 ½ or older may perform a Qualified Charitable Distribution (QCD) and directly transfer funds from their IRA to a qualified charity to satisfy some or all of their Required Minimum Distribution (RMD) for the year. The maximum you can distribute from your IRA using a QCD is $105,000 in 2024.
  Reminder: Donor-Advised Funds cannot be the recipient of a Qualified Charitable Distribution.
• Charities, including Donor-Advised Funds and Private Foundations, must receive your gift by December 31, 2024, for you to claim the charitable deduction on your 2024 tax return. We recommend initiating stock gifts from your taxable account at Bragg Financial by the end of November to allow plenty of time for the transfer to be processed and received. Our custodians cannot guarantee that gifts of stock initiated after December 16 will be received by the designated charity by the end of 2024.

IRA Distributions

Take your Required Minimum Distribution (RMD) by December 31.

This applies to Individual Retirement Account (IRA) and 401(k) account holders born in 1951 or earlier. If you turn(ed) 73 in 2024, your first RMD is not due until April 1, 2025. However, if you defer your first distribution until then, you will need to take a second distribution before December 31, 2025.

• If you’re charitable, consider satisfying your RMD by giving directly to charity from your IRA. See our note on the QCD option above.
• Certain Inherited IRA/Inherited Roth IRA holders may also be subject to the RMD requirement. Reach out to your advisor if you have an inherited IRA and are uncertain about your requirements. Rules on RMDs from inherited IRAs vary based on the year the original owner passed, your relationship to the owner, and whether the original IRA owner had reached RMD age prior to their death. For an update on these rules, please see George Climer’s Inherited IRAs: Update to the Ten-year Window for Non-Spouses.
• Significant penalties apply if you fail to take your IRA required minimum distribution before December 31. To ensure enough processing time, be sure to request your distribution before December.

Gifts to Individuals and 529 Plans

• The 2024 annual gift tax exclusion for gifts to individuals is $18,000 per person. Gifts must be received and, if a check, must be cashed by December 31, 2024. This includes gifts to 529 Plans, which must be deposited in time to be recorded on a 2024 statement.
• If you took a qualified distribution from a 529 plan this year, make sure the related qualified expenses are paid by December 31, 2024. For example, if you took a distribution from the 529 plan to pay for textbooks, make sure you purchase those textbooks by year-end. Also, as Mary Lou Daly outlines in Empty Nest: Kids Out, Tuition Bills In! How to Use Your 529 Plan to Pay for College, you must receive reimbursements from the 529 Plan in the same calendar year you paid qualified expenses. For example, if you pay spring 2025 tuition in November 2024, your reimbursement for that tuition expense must come from the 529 plan in 2024.

Income Taxes

• Review the year-to-date realized capital gains in your taxable accounts for opportunities to recognize additional gains if your income is in the 0% bracket. If you own mutual funds in your portfolio, remember that they often make capital gain distributions in the fourth quarter.
• Tax Loss Harvesting—Consider harvesting capital losses to offset realized capital gains. If you sell assets for tax loss harvesting but want to maintain exposure to that asset, be sure to wait more than 30 days before re-purchasing the asset to avoid the wash-sale rule.
• If you haven’t paid enough in taxes this year or haven’t made your quarterly estimated payments, you may have options. If you’re working, you can request additional tax withholding be taken from your paycheck before year-end. If you have an IRA, you can make a tax withholding distribution as well. These withholdings can help you prevent an underpayment penalty.
• The additional 0.9% tax on earned income and 3.8% tax on net investment income starts at a Modified Adjusted Gross Income or MAGI² of $200,000 (single) or $250,000 (married filing jointly). If you are close to this threshold, consider if deferring income recognition is possible and makes sense.
• If you are self-employed or have income from a small business (including income-producing real estate), you may be eligible for a Qualified Business Income (QBI) deduction. Work closely with your CPA to determine if you might benefit.

Retirement Plans, Healthcare Accounts and Benefits

Review the information below for 2024 annual contribution limits for Retirement, HSA, and FSA Accounts:

Defined contribution plans: 401(k), 403(b), etc.

The last day to make a contribution to your 401(k) or Defined Contribution Plan for the current tax year is December 31. There are ways to contribute additional funds on an after-tax basis to these retirement plans. Read more about one option in Marc Scavo’s Mega Backdoor Roth Contributions.

IRAs and Roth IRAs

The last day to make a contribution to your IRA or Roth IRA for the 2024 tax year is April 15, 2025.

See Roth IRA phaseouts for eligibility. If your income level makes you ineligible to make direct Roth IRA contributions, you can still consider making “backdoor” contributions. Check with your advisor to determine what is best for you.

Consider a Roth conversion if you are in a lower bracket today than anticipated in future years. Marc Scavo explains why Roth conversions in a down market can be especially advantageous in Roth Conversions: One Proactive Measure During Bear Markets.

Healthcare Savings Account (HSA)

The last day to make a contribution to your Health Savings Account (HSA) for the current tax year is December 31.

If you have a high-deductible health plan (HDHP), you can contribute to a HSA and, unlike the FSA, HSA balances don’t have to be spent down each year.

Flexible Spending Account (FSA)

The last day to make a contribution to your FSA for the current tax year is December 31. Be sure to spend the full balance by the required plan deadline. Remember, any funds you don’t use, you will lose.

Other Benefit Considerations

• Employer open enrollment period: Review any changes to your healthcare and benefit options available through your employer. Compare options to ensure you still have the right coverage for your circumstances. For group life insurance, if you are turning an age that ends in a zero or five, you may experience a significant increase in premiums. If the coverage is still warranted, consider pricing options for policies outside your group plan.
• Healthcare through the Health Insurance Marketplace: Confirm that the income you reported to the Marketplace is line with your actual expected year-end income. If your income is substantially different, report the change by updating your application online, by phone, or in person. Your premiums for the remainder of the year will be adjusted accordingly. If your income is higher than initially reported, this adjustment will reduce the amount of the benefit you are required to pay back when you file your tax return.

Medicare Reminders

• Part D 2025 open enrollment dates are October 15 through December 7, 2024. Our partners at SHIIP (Seniors’ Health Insurance Information Project) have shown us how valuable it is to re-evaluate your prescription coverage annually.
• Part B premiums you will pay in 2026 will be based on your 2024 MAGI. While we don’t have the 2025 rates yet, the table in this link shows the 2024 rates based on 2022 MAGI ranges. If you are close to an increase in premium level based on the ranges shown below, consider whether delaying income to 2025 is a viable option.

Planning for 2025: Transfer Tax

• Review the use of the unlimited gift exemption for direct payment of tuition and medical expenses. Read more from Lynn Araujo in her article Simple Solutions to Reduce Your Estate Tax and from Phillips Bragg Maximizing Wealth Transfers to Minors.
• Consider large gifts to family. In 2024, the lifetime transfer tax exclusion amount is $13.61 million per person ($27.22 million for married couples). This amount is set to decrease after December 31, 2025, likely to between $6 million and $7 million per individual. If you have the capacity and desire to make a substantial gift to family during your lifetime, consider doing so before the current limits expire. Read more at Reduce Your Estate: Wealth Transfer Planning. Furthermore, if you’re considering making a gift in trust, meet with your estate attorney now to allow enough time to put the right structure in place and avoid a last-minute rush.
• The current rising interest rate environment also presents opportunities for some advanced wealth transfer strategies,  namely Qualified Personal Residence Trusts (QPRTs) and Charitable Remainder Trusts (CRTs). Phillips Bragg writes about these strategies in his article Hand-Me-Downs and Split-Interest Gifts.
• Review beneficiary designations for life insurance policies, retirement plans, and transfer-on-death accounts and update as necessary.

As we mentioned, we don’t intend this article to be an exhaustive list of all items to consider. Instead, we hope to address a few of the most common tax and healthcare items that may be within your control. If you find yourself with time to spare, consider revisiting the following items annually: your short/mid/long-term financial goals, cash flow projections or retirement planning, your cybersecurity plan, and your insurance and estate planning. If you would like a more comprehensive list of questions to review regarding your overall financial health and planning, please see the article Financial Planning 101.

Please reach out to us at Bragg Financial with any questions or if you would like to discuss this further. We advise you to work with your CPA to run tax projections before implementing any significant changes.

Definitions

¹ Adjusted Gross Income (AGI) is gross income less certain adjustments. AGI includes all taxable income, including wages, bonuses, self-employment income, taxable interest, dividends, capital gains, retirement distributions, annuities, rents and royalties, taxable social security income, alimony received (with agreements prior to 2019). The most common adjustments that reduce your AGI include one-half of self-employment tax paid, alimony paid (with agreements prior to 2019), pre-tax retirement/HSA plan contributions, student loan interest, and certain losses. Back to top

² Modified Adjusted Gross Income (MAGI) then adds back to your AGI certain deductions from above. Back to top

This information is believed to be accurate at the time of publication but should not be used as specific investment or tax advice as opinions and legislation are subject to change. You should always consult your tax professional or other advisors before acting on the ideas presented here.