This time of year is full of highly anticipated countdowns to family gatherings, holidays, and of course the new year. We’re here to remind you of the countdown to year end planning for the financial side of things too. As always, if you’re a Stone Pine client we’re thinking about all of these things for you!
7. This is a particularly important year for Medicare open enrollment, which ends December 7th. Part D, the prescription drug plan, has some significant changes that go into effect in 2025. Now is an excellent time to make sure your part D plan covers all of your medications. You also want to check the pricing as many plans are increasing premiums due to the $2,500 cap on out of pocket drug expenses. Some plans are even being cancelled entirely.
6. If you only remember one thing, let it be to take your Required Minimum Distribution. If you turned 73 in 2024 or are older, the government requires you to take out a minimum amount from certain qualified accounts (think 401(k)s and IRAs). In other words, it’s time to start paying taxes on those deferred assets!
If you’ve inherited an IRA you also likely have an RMD to take this year too!
5. Are you planning to give a cash gift before the end of the year utilizing your annual gift tax exclusions of $18,000 per donee? If so, consider writing the check sooner than later. In fact, the government requires that the check be cashed before year end to count toward this year’s exclusion. (If you’re making a last minute cash gift consider a bank to bank transfer rather than a check).
4. Are you in a low tax bracket for 2024 and could benefit from a Roth conversion? For example, paying taxes in the 12% bracket now could save you money on tax payments if you project you will be in the 22% bracket later. This type of strategy often works best when you’re in the early years of retirement.
3. Another strategy you can employ, if you’re in a low taxable income year, is to take advantage of the 0% capital gains tax bracket. This means you can realize capital gains paying no tax and at the same time reset your cost basis for the future.
2. For those of us still working, the end of the year is typically when we make our election for salary deferral for the new year. If you like to max out your retirement plan contribution there is a new rule that will affect some workers. The regular deferral maximum is $23,500 for 2025, with a $7,500 catch up contribution for those over 50, but for 2025 there is also an additional catch up contribution for those workers aged 60-63 of another $3,750. All together that’s $34,750 of salary deferral!
1. A reminder to use your Flexible Spending Account (FSA) funds before the end of the year. Some employers allow for a short period of time to use the funds in the new year, or a small amount of funds that can be rolled over, but for the majority of folks it’s a “use it or lose it” policy so consider hurrying up and getting that new pair of glasses or stocking up on some cold or allergy medicine.
Finally, a few end of year strategies to consider depending on what happens with future legislation:
If you’ve already reached the $10,000 State and Local Tax deduction (SALT), and you haven’t yet paid property taxes for the year, see if you are able to wait until January 1st without paying a penalty. This strategy might prove lucrative if the $10,000 SALT cap is increased or eliminated for 2025.
Have you been thinking about buying an electric car? There is a possibility of a future repeal of the $7,500 electric car credit, in which case if you’re planning a purchase, doing so before the end of the year could amount to significant tax savings. Just be mindful of the income thresholds for the tax credit and be sure the car you are purchasing qualifies.
