5 Year-End Financial Strategies to Close 2024 Strong & Start 2025 Smarter

As the holidays approach and 2024 draws to a close, it’s easy to let financial planning fall to the wayside. Before the parties really start, consider these five planning opportunities:

1. Enhance Your Retirement Contributions

For 2024, the 401(k) contribution limit is $23,000, with an additional $7,500 catch-up contribution for those aged 50 and above. A small increase to your savings rate can have an outsized dollar effect later on, so if your 401(k) changes don’t take effect this year, you’ll still start out on the right foot in 2025.

2. Leverage Lifetime Giving

The current gift and estate tax exemption is $13.61 million per person, but it may decrease significantly in 2026 if Congress does not renew the Tax Cuts and Jobs Act.

• Annual Gift Tax Exclusion. You can give up to $18,000 annually — or $36,000 from married couples — to anyone without reducing your lifetime exemption. In 2025, those numbers will be $19,000 and $38,000.
• Education & Medical Expenses. Payments made directly to medical or educational institutions on behalf of another person don’t count towards annual or lifetime gift limits, making them an effective way to transfer wealth. Contributing to a 529 plan can offer state tax benefits and cover costs ranging from K-12 tuition to college expenses and student loan repayments.
• Gifts to Irrevocable Trusts. Consider gifting to irrevocable trusts as a way to provide for future generations, protect your assets from creditors, and reduce the size of your estate.

3. Proactively Manage Your Tax Strategy

Year-end financial planning involves more than analyzing your annual investment returns; it’s about implementing proactive strategies that set you up for long-term success.

• Tax-Loss Harvesting. Selling investments at a loss to offset capital gains can reduce your taxable income. Capital losses can also be carried forward to future years. Be mindful of the IRS wash-sale rule, which disallows claiming a loss if the same or substantially identical security is repurchased within 30 days.
• Roth Conversions. This strategy requires paying tax on the amount converted. However, Roth IRAs can grow tax-free forever and have no RMDs. Roths are also a favored vehicle of inheritors, as distributions will be tax-free.

4. Optimize Charitable Contributions

• Donor-Advised Funds. DAFs allow you to contribute assets and receive an immediate tax deduction for their fair market value, appreciated stocks included. The kicker is that you can decide on the destination charities after the DAF is funded.
• Gifting Appreciated Stock. You can also donate appreciated securities directly to a charity of your choice and avoid capital gains tax in the future on those positions.
• Qualified Charitable Distributions. QCDs allow those who are 70½ and older to make tax-free donations to charity while simultaneously counting that total against their yearly RMD, which is taxable income.

5. Anticipate Legislative Changes

• Tax Cuts and Jobs Act. An extension of the TCJA would maintain lower individual and corporate tax rates and keep the expanded standard deduction and child tax credit.
• Changes in Estate Tax Laws. Altering estate tax exemptions and rates could affect wealth transfer strategies. For example, a drastically lowered exemption may require a second-to-die insurance policy to offset the heirs’ tax bill.
• Tariff Increases. Implementing higher tariffs on imports, particularly from China, aims to protect domestic industries but may increase consumer prices.
• Adjustments to State and Local Tax (SALT) Deductions. Increasing or removing the $10,000 cap would allow you to deduct more of your state and local taxes at the federal level.
• Reduced Corporate Taxes for Manufacturers. Lower corporate tax rates for manufacturing firms could boost domestic production and competitiveness, potentially leading to increased investment and job creation.

Working closely with your financial advisor, CPA, and attorney will allow you to plan comprehensively for your family’s future. Cheers to 2025!