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Eight Year-End Financial Planning Recommendations as 2024 Approaches

November 9, 2023 | By Tim Daly, CPA, CFP®
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2024 is on the horizon, and we recommend taking advantage of some key planning opportunities before 2023 expires. The start of any new year marks a challenging time for financial planning, and today’s volatile economic landscape only heightens the sense of uncertainty.

The best response? Plan proactively, and consult with your financial advisor, accountant, and/or estate attorney to determine the best path forward for your personal financial situation. 

If you are not sure where to start, we outline eight of the most important end-of-year action items below. For a more in-depth guide, you can access our free Year-End Tax and Wealth Planning Review resource here.

Eight Key Tax and Wealth Planning Action Items Before the End of the Year

1. Carefully Consider Your Tax Projection

A detailed projection of your tax obligations is a great way to begin planning for the next year while avoiding any surprises. First, look over your previous year’s tax return and consider what important changes might have occurred (the Year-End Tax Planning and Wealth Review has a guide that can help).

When it comes to your investment portfolio, one of the tax considerations is how to manage the recognition of capital gains and losses. Looking into whether certain unrealized losses can and should be taken can help your tax situation. Tax-loss harvesting can be an effective way to generate tax savings. You can read more about this topic in our Insight “Taking a Closer Look at Tax-Loss

2. Take Stock of Your Retirement Plan

If you are not maximizing your 401(k) or Individual Retirement Account (IRA) contributions, doing so is a great place to start. If your employer doesn't already offer a retirement plan, now is also the time to consider setting up a tax-advantaged option.

Please refer to our year-end planning guide for a list of common questions related to your retirement plan.

3. Decide if You Want to Do a Roth Conversion

Take a moment to look ahead toward retirement. Do you see yourself in a higher tax bracket in retirement than the one you are in now? If so, you might want to consider converting a portion of tax-deferred dollars from Traditional IRA to dollars that grow tax-free in a Roth IRA.

4. Start Funding Your Health Savings Account (HSA)

A “Health Savings Account” (HSA) is a savings account for medical expenses which can provide substantial tax benefits. HSA contributions are tax-deductible, HSA earnings growth is tax-free, and even withdrawals are tax-free, provided they are used for qualified medical expenses. Because medical expenses represent a large cost of retirement for many individuals, an HSA can be an excellent, low-cost method to save for the long term. 

5. Calculate Your Medical Costs

If your medical expenses from the past year meet certain criteria, they may be tax deductible. Before the end of the year, take some time to add up your medical bills for 2023. Calculating this amount ahead of time is important to accurately predicting your tax bill.

6. Consider Making Charitable Donations Before 2024

Charitable donations can help reduce your tax burden and help your community at the same time. To be eligible for a federal income tax deduction, donations must be completed by December 31.

Our year-end tax planning guide provides a more detailed breakdown of the tax efficiency of different options for charitable giving, the possibility of the charitable deduction carryforward, and the advantages of donating long-term appreciated securities.

7. Consider End of Year Gifts

Gifting can be advantageous to transfer wealth and ultimately potentially reduce the amount of estate taxes owed. In 2023, you can give any person an annual exclusion gift of $17,000 per year gift tax-free ($34,000 for married couples). Any amount given above this threshold to any one individual reduces your lifetime gift tax and possibly generation-skipping transfer tax exemption. However, gifting assets that you expect to appreciate over time can help keep your estate below the federal threshold for the estate tax. In 2023, estates valued at death under $12.92 million per person ($25.84 million for married couples) will not be taxed at the federal level. Keep in mind though that the federal estate tax exemption is scheduled to ‘sunset’ in 2026 to roughly half of where it is today so it is critical to review your situation. To learn more, see Estate Planning: Gifting Strategies through 2025.

Our planning guide provides greater detail on other important considerations like qualified transfers (for health insurance premiums, school tuition, etc.) and the importance of consulting your estate attorney and Wealthstream advisor to see what makes most sense for your situation.

8. Review Estate Planning Documents

Even carefully-crafted estate planning documents can fall out of date as tax laws and your family situation change. A good rule of thumb is to review your estate planning documents every five years, or after a major life event like a marriage, birth, death, or sale of a business. Take stock of the past year for events that might warrant changing your beneficiary designations, and review your estate planning documents accordingly.

Build a Proactive, Personalized Financial Plan for 2024

While the recommendations above are a great place to start, they are just the foundation of a robust year-end financial planning process. Please access our Year-End Tax and Wealth Planning Review for a deeper look at the planning imperatives outlined above.

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