Year-End Financial Planning: Your Ultimate Guide for a Prosperous 2024
Hello everyone, can you believe it? 2023 is drawing to a close! As we wrap up another year, it’s an opportune time to review and strategize various aspects of your financial life. Let’s dive into some of the key areas you should consider as part of your year-end financial planning.
Asset & Debt Management
Unrealized Investment Losses
If you have unrealized losses in your taxable investment accounts, it might be wise to realize those losses. They can offset any capital gains you’ve had this year, or even deduct up to $3,000 against your ordinary income.
Capital Gains Distributions
If your investments in taxable accounts are subject to year-end capital gains distributions, look into strategies to potentially minimize your tax liability.
Required Minimum Distributions (RMDs)
If you are subject to RMDs from your retirement accounts, keep in mind that these can often be aggregated across multiple IRAs. However, note that RMDs from inherited IRAs must be calculated separately, as must RMDs from employer-sponsored plans.
If you foresee your income rising in the future, consider Roth IRA or 401(k) contributions and conversions. If you expect a decrease, then focus on traditional IRA and 401(k) contributions.
Capital Losses and Gains
Use any capital losses or carry-forwards from previous years to offset gains. You can also use these losses to reduce your ordinary income by up to $3,000.
Tax Bracket Management
Be aware of your current tax bracket and consider strategies that either defer income or accelerate deductions to keep you in a lower tax bracket.
For those charitably inclined, look into tax-efficient funding strategies like gifting appreciated securities or making qualified charitable distributions.
Special Considerations for Business Owners
If you’ve experienced significant changes in revenue or operations this year, it might be worth revisiting your business structure (e.g., LLC, S-Corp, C-Corp) to see if a different setup could offer tax advantages.
Bonus Depreciation and Section 179
If you’ve purchased new business equipment or property, consider taking advantage of bonus depreciation or Section 179 expenses to help lower your taxable income for the year.
Employee Benefits and Bonuses
Now is the time to review and possibly update employee benefits packages. If you’re considering offering year-end bonuses, keep in mind how this additional income might impact both your employees’ and your own tax situations.
Consider establishing or contributing to a retirement plan like a SEP-IRA, SIMPLE IRA, or a Solo 401(k) if you haven’t already. Contributions can significantly reduce your current year tax liability and help you build retirement savings.
Accounts Receivable and Payable
Review your accounts receivable and write off any uncollectible debts to reduce your taxable income. Conversely, consider settling up with vendors or accelerating payments for tax deductions.
If you’re using a method of accounting that allows for it, do an inventory assessment and consider selling off obsolete or slow-moving items.
QBI Deduction Strategies
If your business is a pass-through entity, consider the optimal salary to pay yourself that allows you to maximize the Qualified Business Income (QBI) Deduction.
R&D Tax Credits
If your business engages in research and development, check if you’re eligible for R&D tax credits, which can offer significant tax savings.
If you expect higher tax rates in the future, consider strategies for deferring income into next year or accelerating deductions into the current year.
If you’re planning on making charitable contributions, consider doing so in a way that maximizes your business tax benefits.
Cash Flow Planning
Additional Savings Opportunities
You may be eligible to contribute more to your IRA or 401(k) than you currently are. Be sure to consult with your plan provider for specifics.
529 Plan Contributions
If you’re contributing to a 529 plan, you can make a lump sum contribution of up to $85,000 and spread it over five years for gift tax purposes.
Flexible Spending Account (FSA)
If you have a balance in your FSA, familiarize yourself with your employer’s options for rolling over or extending the period to use these funds.
Health Insurance Deductibles
If you’ve already met your health insurance deductible for the year, consider incurring any lingering medical expenses before the deductible resets.
Estate Plan Review
Any changes in your family or asset structure this year should prompt a review of your estate plan.
Don’t forget to make any planned gifts up to the annual exclusion amount of $17,000, which are gift-tax-free.
For parents with high schoolers or younger children, consider financial aid planning strategies to optimize your chances of a favorable aid package.
Also keep an eye out for new laws that might affect your overall financial planning in 2024.
As we bid adieu to 2023, it’s crucial not to let the year-end without making informed decisions that align your finances with your goals. We’ve covered a lot of ground today—from asset and debt management to the nuances of tax and estate planning.
Remember, financial planning is not a one-size-fits-all endeavor, especially when it comes to business ownership and high-earning individuals. If you’re looking to lessen stress, free up time, and minimize your tax burden, let’s talk. Click HERE to schedule a no-obligation call with me, where we’ll dive deep into your unique financial landscape and how our Abundant Wealth Process can help you thrive. Don’t let another year pass by without optimizing your financial well-being. Keep building, and let’s build together in 2024.
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Securities offered through The O.N. Equity Sales Company, Member FINRA/SIPC, One Financial Way Cincinnati, Ohio 45242 (513) 794-6794. Investment Advisory services offered through O.N. Investment Management Company.
Tax and/or legal advice is not offered by Chris Clepp. Please consult with your tax professional for additional guidance regarding tax-related matters. Estate planning services provided in conjunction with your licensed legal professional.