Year-end Tax Planning

Absent Congressional Action, several key benefits of the 2017 TCJA will expire on December 31, 2025. 

Major changes for individuals would include lower brackets returning to pre-2018 levels and the nearly doubled standard deduction will drop back to its former amount (adjusted for inflation) .

If you intend to make a charitable donation, you may wish to make that donation in 2024 rather than in 2025.    

Consider donating appreciated assets that have been held for more than one year rather than cash. For example, you can benefit from a deduction for the Fair Market Value of appreciated stock rather than pay capital gains taxes on the appreciation.  

Opening and funding a donor-advised fund (DAF) allows for a tax-deductible gift in the current year and the ability to distribute those funds to charities over multiple years.  

Qualified charitable distributions (QCDs) are a beneficial option for those over 70½ years old and who do not typically itemize on their tax returns. If you have a required minimum distribution (RMD) from your retirement accounts, this may be beneficial for you.  

It is essential to maintain proper documentation of all donations, including obtaining a letter from the charity confirming no goods or services were provided in exchange for donations of $250 or more.

RMDs are the minimum amount you must withdraw annually from your retirement accounts once you reach a certain age (generally age 73). Failure to do so can result in significant penalties. 

You may be able to roll retirement funds to a qualified charity to satisfy your RMD, which generally would not trigger a taxable liability to you.   

If the provisions of the TCJA are allowed to sunset, converting traditional IRA funds into Roth IRAs before higher tax rates are implemented may be beneficial. 

The sale or exchange of virtual currencies, the use of such currencies to pay for goods or services, or having such currencies that you hold as an investment will generally have tax impacts. This is an area of heightened IRS scrutiny and reporting requirements.  

If you hold and transact with digital assets, you should be aware of a safe harbor that allows for the allocation of unused basis before the end of the year if you used the universal method to determine the cost of those assets.  

Digital assets include non-fungible tokens (NFTs) and virtual currencies, such as cryptocurrencies and stablecoins. 

The Inflation Reduction Act of 2022 included new and expanded tax credits for solar panels, electric vehicles (EVs) and energy-efficient home improvements.  

While the rules are complex, there is time to benefit from these credits in the current year. It’s important to note that these credits have specific eligibility requirements and limitations. 

The tax credits for energy efficient home improvements recently underwent significant changes. This credit now has an annual limit rather than the lifetime limit that was in place previously. This change allows homeowners to benefit from the credits year after year if they continue to make energy-efficient upgrades. The energy efficient home improvements credit covers a wide range of improvements, including installing windows, doors, insulation, and various types of heat pumps.