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Opinion: 2024 year-end planning checklist

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As we approach the end of another year, below are helpful planning strategies to consider. Please consult with your tax and financial planning professional to better understand how these strategies may impact your personal situation.

Retirement planning
• Convert a portion (or all) of a traditional IRA to a Roth. Conversions generally increase taxable income in the year of the conversion; however, Roth IRA conversions can be an effective tool in tax bracket management and planning for distributions in retirement.

• Make nonqualified IRA contributions and subsequently convert these traditional IRA contributions to a Roth. This is often referred to as the “two-step Roth contribution.” While limited to the annual IRA contribution limit ($7,000 + $1,000 catch-up for those over 50), if done over several years, the Roth balance could grow to a sizable amount during retirement.

• Check year-to-date 2024 retirement plan contributions and make additional contributions if allowed.

• Review the timing of IRA distributions to help with tax bracket management and to check all required minimum distributions are taken.

Charitable giving
• For those age 70.5 and above, gift up to $105,000 of income otherwise taxed as ordinary income directly from an IRA to a qualified charity via a qualified charitable distribution. For this purpose, the charity must be a U.S. Internal Revenue Code Section 501(c)(3) organization; private foundations, supporting organizations and donor-advised funds do not qualify.

• Donate appreciated securities held longer than a year from nonretirement accounts instead of cash to a charity. This approach avoids any tax liability associated with the gain while providing a deduction equal to the fair market value of the security gifted, limited to 30% of adjusted gross income, without regard to any net operating loss carryback.

• “Bunch” multiple years of charitable contributions into a single tax year to help push total itemized deductions above the annual standard deduction amount.

• Pair the above “bunching” strategy with the utilization of a DAF to provide flexibility on the timing and determination of which charities to donate to, while securing the charitable deduction in the current year.

Estate planning
• Review current estate planning documents such as wills, trusts, medical directives, beneficiary designations, etc., to determine if any updates are necessary due to changes in personal situations or state/local laws. Don’t forget retirement plans, insurance policies and investment accounts.

• Unless Congress intervenes, many significant provisions of the historic Tax Cuts and Jobs Act of 2017 will not apply for tax years beginning after December 31, 2025, including the increased estate and gift tax exemption threshold. Prepare now to maximize the exemption.

Income tax planning
• Review workplace withholdings for adequate tax withholding from paychecks and remember to incorporate year-end bonuses/business distributions in your tax planning.

• Review and take advantage of benefits within dependent care and/or medical flexible spending accounts and health savings accounts.

• If your state of residence offers a state tax deduction or credit for 529 plan contributions, consider making or maxing out your contribution by year-end to receive the deduction or credit on your 2024 tax return.

• Review and plan for any carryovers from prior years such as net operating loss, passive activity loss, capital loss, business credits and charitable contribution carryovers.

Investment and insurance planning
• Harvest any losses in nonretirement accounts to help offset realized gains while planning with the wash sale rule. Any realized losses carried forward from 2024 can help offset realized gains in future tax years.

• Analyze specific tax lots to determine the most appropriate shares to sell this year.

• Review year-end mutual fund capital gains distribution estimates for funds held in taxable accounts.

• Review the location of assets between traditional IRAs, Roth IRAs and nonretirement accounts.

• Review and update life, health, home, auto and umbrella for adequate coverages.

To better understand how these strategies may help your personal situation, please contact your tax and financial planning professional.

Brian Lowery and Jim Gustafson are directors at Forvis Mazars LLP. They can be reached at brian.lowery@us.forvismazars.com and jim.gustafson@us.forvismazars.com.

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