Workplace accounts. Encourage clients to consider maximizing contributions to their workplace plans to take full advantage of any employer match benefit.

Traditional IRAs. Maxing out contributions to traditional IRAs is another option. See below for the latest amounts that can be set aside this year. Modified adjusted gross income (MAGI) limits for contributions to traditional and Roth IRAs increased in 2024, so be sure to review MAGI eligibility thresholds.

If allowed under an employer’s plan, individuals can carry over up to $640 in unused health flexible spending account (FSA) amounts. Although the rollover option applies to the employer’s plan year rather than the calendar year, your year-end assessment could include a look at how clients have tapped their FSA thus far and whether they should make changes in future years. Clients with dependent-care FSAs can save as much as $5,000 per family or $2,500 per filer if they are married but filing separately in 2024.

Now is also the time to discuss maximizing health savings account (HSA) contributions with clients who have high-deductible health plans (HDHPs). Although this can be a fairly complex planning area, here’s a general overview of how HSA limits work:

Don’t forget to discuss pro-rated versus “last-month-rule” contributions for clients who had an HDHP for part of 2024.

Clients on the threshold of a tax bracket may be able to put themselves in the lower one by deferring some income to 2025. Here are a few thresholds applicable in 2024 to keep in mind:

• 37 percent marginal tax rate: Taxable incomes exceeding $609,350 (individual), $731,200 (married filing jointly), $609,350 (head of household), and $365,600 (married filing separately)

• 20 percent capital gains tax rate: Taxable incomes exceeding $518,900 (individual), $583,750 (married filing jointly), $551,350 (head of household), and $291,850 (married filing separately)

• Additional Medicare tax: For clients with W-2 or self-employed income above certain MAGI thresholds, total Medicare taxes will be 2.35 percent and 3.8 percent, respectively

• 3.8 percent surtax on investment income: The lesser of net investment income or the excess of MAGI greater than $200,000 (individual), $250,000 (married filing jointly), $200,000 (head of household), and $125,000 (married filing separately)

Year-end financial planning activities should include a review of capital gains and losses for your clients and an assessment of whether any portfolios need rebalancing. This process may reveal tax-planning opportunities, such as harvesting losses to offset capital gains.

Charitable contributions donated directly to a qualified charity or a donor-advised fund (DAF) may be eligible for a federal tax deduction. Keep in mind, though, that this strategy is only beneficial if clients itemize deductions. So, it’s worthwhile for clients to meet with their tax professionals to discuss whether their charitable contributions and other deductions will exceed their standard deduction. One way you might achieve this is by bunching the annual gifts normally made over several years into one lump-sum gift in one year.

Deductions on DAF contributions are capped at 60 percent of AGI for cash and 30 percent of AGI for long-term appreciated securities. In general, these can be carried forward for the year of donation, plus an additional 5 years until the full deduction amount has been exhausted.

Qualified charitable distributions (QCDs) may be a consideration as well: Clients ages 70½ and older can make a QCD of up to $105,000 directly to a charity; married joint filers may exclude up to $105,000 donated from each spouse’s IRA.

While these distributions to charity do not qualify for a charitable tax deduction, they do have income tax benefits and can satisfy the RMD requirement. SECURE 2.0 expanded the allowable recipients of QCD distributions to charitable remainder trusts and charitable gift annuities, under which the client or the client’s spouse may retain an income interest, with the remainder payable to charity. QCDs to such “split-interest entities” are limited to a lifetime limit of $50,000.

Alternative minimum tax (AMT) exemption limits increased in 2024 to $85,700 for single tax filers and $133,300 for married joint filers. Depending on AMT projections, clients may want to wait until January 2025 to exercise incentive stock options.

Clients who may be subject to an estimated tax penalty can ask their employer to adjust their withholding to cover shortfalls (via Form W-4). The IRS tax withholding estimator can be a valuable resource here. They could also explore using Form 1040-ES to make their estimated quarterly payments for income that’s not subject to withholding.

A retiree’s first RMD must be completed by April 1 of the year after they turn 73. After the first year of RMDs, clients must satisfy their annual RMD distribution by December 31 for each ensuing year. If a taxpayer chooses to delay the first RMD until April 1, they will need to take another RMD before year-end (i.e., essentially two RMDs in that first year if they delay).

After the Supreme Court overturned the Biden administration’s proposed student debt cancellation plan, federal student loans resumed accruing interest on September 1, 2023, with payments resuming as of October 2023. Those payments were subject to a 12-month “on-ramp transition period,” during which default was waived for nonpayment. The on-ramp period ended on September 30, 2024.

Additionally, the Supreme Court recently decided not to lift the injunction placed on President Biden’s Saving on a Valuable Education (SAVE) plan—which replaced the Revised Pay As You Earn (REPAYE) plan. All borrowers currently enrolled in the SAVE Plan have been placed in forbearance.

According to the Federal Student Aid website, borrowers should hear from their loan servicers regarding next steps. For the latest information, suggest your clients consult this helpful webpage and sign up for updates on the U.S. Department of Education website.

It’s a good idea to review estate plans as part of the year-end financial planning process. Depending on a client’s net worth, setting up an irrevocable trust, such as an intentionally defective grantor trust, spousal lifetime access trust, or irrevocable life insurance trust, may be an effective strategy to reduce estate tax exposure.

If the TCJA sunsets as scheduled at the end of 2025, it will cut the federal estate tax exemption by approximately 50 percent, reducing the federal estate and gift tax exemption from approximately $13.6 million per person to an anticipated $7.5 million per person. This would greatly expand the number of clients with current or potential future federal estate tax concerns. Keep an eye out for clients whose assets may appreciate rapidly in the coming years, including small business owners.

To avoid the loss of the currently available exemption, clients may need to execute documents and make sizeable asset transfers before December 31, 2025.