December Client Bulletin

Year End Tax Saving Checklist

Conducting a year-end tax review of your financial situation can uncover opportunities to cut your tax bill or save you from an unpleasant tax surprise. But hurry, the clock is ticking! Here are several areas to consider reviewing in the next few weeks to trim your tax bill.

There’s still time to uncover ways to cut your 2024 tax bill before the end of the year. In this month’s newsletter, use our year-end tax savings checklist to help you minimize your annual tax liability.

Also learn about tax policy changes that may be on the horizon in 2025, and read about how the art of selfless giving can help you capture the spirit of the holidays. And test your knowledge of how the holidays are celebrated around the world with our annual holiday quiz!

Please pass this information on to anyone that may find it useful and call if you have any questions or concerns.

Review #1: Retirement Savings Accounts. The deadline to contribute to a 401(k) plan to help reduce your 2024 taxable income is December 31st. So if your employer’s plan allows it, consider making a last-minute lump sum contribution. For 2024, you can contribute up to $23,000 to a 401(k), plus another $7,500 if you’re age 50 or older. Even better, you have until April 15, 2025, to contribute up to $7,000 into a traditional IRA, plus another $1,000 if you’re age 50 or older. And as long as your income does not exceed phaseout limits, your traditional IRA contribution can reduce your taxable income on your 2024 tax return.

Review #2: Investments. If you own stock outside a tax-deferred retirement plan, you can sell your under-performing stocks by December 31st and use these losses to reduce any taxable capital gains. If your net capital losses exceed your gains, you can net up to $3,000 against other income such as wages. Losses over $3,000 can be used in future years.

Review #3: Appreciated Assets. Consider selling appreciated assets in the tax year that helps you the most. While this strategy may be hard to accomplish this late in the year, it’s still worthy of consideration. To do this, estimate your current year’s taxable income and compare it to next year’s projected taxable income. Then sell the appreciated asset in the year that will yield the lowest tax. Remember, if appropriate, to account for the 3.8% net investment income tax in your estimates.

Review #4: Tax-Efficient Contributions. As you’re reviewing your appreciated assets, consider donating one or more of these assets if it helps you pass the itemized deduction threshold. If it does, consider donating next year’s contributions as well to maximize the tax savings. Remember when you donate a long-term asset (held for more than one year) you avoid paying capital gains taxes while getting a market value charitable deduction. And don’t forget, if you are over age 70 1/2 you can make up to $100,000 in direct contributions from a qualified IRA account and not pay tax on the withdrawal.

Review #5: Health Spending Accounts. If you participate in a Health Savings Account (HSA), try to maximize your annual contribution to reduce your taxable income. Remember, these funds allow you to pay for qualified health expenses with pre-tax dollars. The deadline for contributing to your HSA and still getting a deduction for the 2024 tax year is April 15, 2025. The maximum contribution for 2024 is $4,150 if single and $8,300 for married couples. If you’re age 55 or older, you can add $1,000 to your HSA contribution. If you have a Flexible Savings Account, you can carry forward a maximum balance of $640 from 2024 into 2025 if your plan allows this.

With the changes happening in Washington D.C., there is now some uncertainty about what tax policies we may see in 2025 and beyond. During this time of uncertainty, it is challenging to create a workable tax plan. But not to fear. There are several things that we DO know about tax changes to start 2025. Here are the key highlights as they are currently known.

What we DO know

• Tax brackets and rates. The seven tax rates remain unchanged while the income subject to each rate got a slight bump. After a 5.4 percent increase in 2024, there’s an additional 2.8 percent increase in income subject to each tax rate in 2025. This means more of your income will be subject to a lower tax rate.
• Higher retirement plan limits. The amount you can contribute to a 401(k) in 2025 is $23,500, up from $23,000 in 2024. The 401(k) catch-up contribution limit in 2025 stays at $7,500 if you’re age 50 to 59, and age 64+. New in 2025, if you are ages 60 to 63, the catch-up contribution limit increases to $11,250. The annual contribution threshold for IRAs remains at $7,000, as does the IRA catch-up contribution limit of $1,000.
• New cryptocurrency reporting rules. New reporting rules in effect as of January 1, 2025 means you’ll need to be more vigilant with tracking your cryptocurrency transactions and complying with the IRS’s digital asset rules. Brokers of digital assets, including cryptocurrency exchanges, custodial services, and certain payment processors, must report sales and exchanges of digital assets to the IRS starting in 2025. Your digital asset transactions will be summarized annually on a new Form 1099-DA. This new reporting of digital asset transactions will be similar to existing reporting for traditional securities such as stocks and bonds.

Changes on the horizon

• The 1099-K reporting threshold. If you use third party payment processors like Venmo or sell tickets on apps like SeatGeek, you’re more likely to receive a tax form of your activity that will also be sent to the IRS. The limit requiring your activity to be reported was $5,000 in 2024. In 2025, this threshold is scheduled to be lowered to $2,500, and further lowered in 2026 to $600.
• Uncertainty over TCJA provisions. There has been discussion about extending and/or making permanent many of the provisions contained in the Tax Cuts and Jobs Act (TCJA) of 2017. Most of the provisions are scheduled to expire at the end of 2025, so we will pay attention to any legislation forthcoming that could change any of this tax landscape.
• Proposed decrease in corporate tax rates. There is also discussion about lowering the corporate tax rate from its current level of 21%, in addition to lowering the effective corporate tax rate from 21% to 15% for domestic manufacturers.

Stay tuned for continuing updates of any tax changes as events unfold in 2025.

The holiday season is celebrated in so many unique ways across the globe. From unusual foods to peculiar customs, each country has its own special way of celebrating. Think you know your global holiday traditions? Test your knowledge and have fun with our annual holiday quiz!

However you celebrate the holiday season, may it be filled with joy and laughter!

We are a generation past the hardships of the dust bowl and the Great Depression. And we are a generation well into an economy based upon consumption. And in this environment, Santa presents an interesting paradox.

From kids’ perspectives, it is about magic and the joy of receiving the unexpected. From Santa’s perspective, it is all about selfless giving. In light of the vast increases in the cost for just about everything, this could be the year you decide to view the holidays from the perspective of Santa.

Here are some ideas to help capture the spirit of giving:

• Give the gift of time. Spend an afternoon with someone you never seem to have the time to see. It could be a neighbor, a parent, an adult child, a grandparent, or a friend. Challenge your kids to give you a non-monetary gift, like a coupon book of chores.
• Make something. Make something instead of buying it. Perhaps it’s a meal, a drawing, or a useful object around the house. There are numerous ideas online and you DO NOT have to be a creative genius, just a willingness to be creative.
• Give the gift of fulfilling an unwanted chore. Offer babysitting for a night out to a young couple. Do the dishes, shovel the walk, or offer to mow the lawn. There are so many unwanted chores, that a creative gift here will be much appreciated.
• Commit to a gift that goes unnoticed. During the holiday season, quietly go about making things better for someone else without them knowing about it. Shoveling a neighbor’s sidewalk, rolling down a trash bin to the curb, gathering a morning paper and placing it by the front door, or picking up the garbage every day in front of a store are all examples that are easy to do.
• Pay it forward. Find opportunities to help someone else with a little surprise gift. Have your kids BRING a gift to help Santa while they visit him. Pay for your meal at a drive through restaurant, and then pay the meal of the car behind you. Do the same thing at a restaurant when you see someone out for a special occasion.
• Provide a smile to someone who needs it. Try to make a person smile every day during the holiday season. Then challenge yourself to do this with a person you do not know, or barely know.

Giving during the holiday season doesn’t need to break the bank. It’s up to all of us to reconnect the season to something that could be a lot more meaningful. Enjoy your holiday season!