Fortress Wealth Planning | Year-end Considerations

With year-end deadlines quickly approaching, now is the time to review your financial and tax strategies. To help you prepare, we’ve highlighted a few key items to consider before January 1st to ensure you’re making the most of available opportunities and minimizing any potential liabilities.

Check Withholding & Estimated Taxes

Income tax underpayments will likely incur penalties of 7% for the final quarter of 2024. In order to avoid penalties, employees and others with taxes withheld must pay at least 90% of taxes owed by December 31, 2024. For those paying quarterly estimated taxes the deadline is extended to January 15, 2025. The IRS charged US taxpayers with an estimated $7 billion in 2023 tax penalties, a 300% increase from 2022 – avoid this potentially costly mistake by evaluating your income tax liability before year-end!

Double check your withholding or quarterly payments for the year, especially if you expect to receive irregular income in the form of a bonus or capital gain. You can use the IRS’ withholding calculator here. In an effort to avoid paying penalties altogether, Employees may consider paying 100% ($150,000 AGI>) or 110% ($150,000 AGI<) of your 2023 taxes. (Click here to learn more)

 

New Rules for Inherited IRAs 

Updated rules for beneficiary’s of Inherited IRAs were provided by the IRS for 2025 and after. (Click here to learn more)

• IF previous account owner was taking Required Minimum Distributions: Annual RMDs are required for beneficiary(s) in years 1-9.

• IF previous account owner was not taking Required Minimum Distributions: Beneficiary(s) are not required to continue RMDs in years 1-9, though the account must be fully depleted by the end of the 10th year.

**From a tax planning perspective, it may be beneficial to schedule varying distribution amounts in years with lower anticipated income.

 

Take Advantage of Employee Benefits

• Health Savings Account: We often mention the benefits of HSAs due to their unique “triple tax benefit,” offering tax-deductible contributions, tax-free investment growth, and tax-free distributions for medical expenses. These accounts can also provide distributions for non-qualified medical expenses similar to a pre-tax Traditional IRA after age 65.
• Deferred Compensation: For individuals with excess income who have already maximized savings in other tax-advantaged accounts, deferred compensation programs offered by your employer can be an excellent strategy. By deferring a portion of your income to future years when you expect to be in a lower tax bracket, you can potentially reduce your current tax burden while building additional retirement savings (especially at retirement!).
• Post-tax 401(k) Contributions: Have you already maxed out your contributions to an employer-sponsored retirement plan and want to save more? Depending on your plan, you may be able to make post-tax (non-Roth) contributions up to the 2024 annual limit of $69,000 ($76,500 age 50+). The key advantage of these contributions is that they can be converted to a Roth IRA tax-free, allowing for potential long-term tax benefits. (Click here to view our blog post on this strategy)
• Disability Insurance: For those in the asset accumulation phase of life, earned income is often their most valuable asset. That’s why it’s crucial to carefully consider short- and long-term disability insurance to protect your income in the event of an unexpected disability. Factors such as your occupation, age, and income level should all be taken into account when selecting the right coverage

 

Maximize Contributions (2024) & Update Future Contributions (2025)

 

Annual Gifting

 

Post-Election Results: Notable expected changes

With the Republicans taking control of the Presidency and Congress, albeit with a slim majority, we have identified a few changes that are expected to be proposed:

• A Lower Corporate Tax Rate: The Trump administration has proposed reducing the corporate tax rate for domestic production from the current 21% to 15%.
• Green Energy Tax Credits: The $7,500 consumer tax credit for electric vehicle purchases and tax credits for energy-efficient home improvements may be eliminated.
• The Tax Cuts and Jobs Act (2017) May be Made Permanent: While nothing is certain, it seems likely that Trump, along with a GOP-controlled Congress, will push to make the TCJA permanent. This would include a range of beneficial estate and tax planning provisions (Click here to view our blog post on this topic).

As we reflect on this season of gratitude, we want to extend our warmest wishes for a happy Thanksgiving to all our clients and friends. We also want to express how much we’ve enjoyed the opportunity to meet with many of you this fall. It’s always a pleasure to connect, and we look forward to continuing our work together in the months ahead.