As the year comes to a close, there are several important financial planning deadlines that may require attention. Timely action can help you prepare for the year ahead while taking advantage of the opportunities available in 2024. Here are some key areas to focus on and the associated deadlines to keep in mind.
Maximizing Contributions to Retirement Accounts
Contributing to retirement accounts is a valuable step in financial planning. For 401(k) accounts, the maximum contribution limit for 2024 is $23,000, with an additional $7,500 catch-up contribution allowed for those aged 50 and older. To take full advantage, contributions must be made by December 31, 2024. SIMPLE IRA contributions must also be made by December 31, 2024, with limits set at $16,000 and an additional $3,500 catch-up contribution for those aged 50 or older. Contributions for Traditional and Roth IRAs can be made until the tax filing deadline, April 15, 2025. However, planning early may help ensure you stay on track with your savings goals.
Health Savings Accounts (HSAs)
If you have a high-deductible health plan (HDHP), you may be eligible to contribute to a Health Savings Account (HSA). The contribution limits for 2024 are $4,150 for individuals and $8,300 for families, with an additional $1,000 catch-up contribution for those aged 55 and older. Although you have until April 15, 2025, to make contributions for 2024, reviewing your funding progress before year-end may help you optimize your tax benefits.
Tax-Loss Harvesting
Tax-loss harvesting involves selling investments that have decreased in value to offset taxable gains elsewhere in your portfolio. For the strategy to apply to your 2024 taxes, transactions must be completed by December 31, 2024. While tax-loss harvesting may potentially reduce your tax liability, consider consulting a financial professional to better understand how this approach may align with your goals and circumstances.
Required Minimum Distributions (RMDs)
For those aged 73 or older, Required Minimum Distributions (RMDs) from certain retirement accounts must be taken by December 31, 2024. Failing to withdraw the required amount may result in a penalty of up to 25% of the amount not withdrawn. The 25% excise tax rate is reduced to 10% if the error is corrected within two years.
If you turned 73 in 2024, you may have until April 1, 2025, to take your first RMD, but subsequent RMDs must be taken by year-end.
Charitable Contributions
If you plan to make charitable donations and claim deductions on your 2024 taxes, contributions must be made by December 31, 2024. Depending on your financial situation, eligible donations may include cash, appreciated securities, or other assets. To ensure deductibility, donations should be made to qualified organizations.
Flexible Spending Accounts (FSAs)
If you participate in a Flexible Spending Account (FSA), funds typically must be used by the end of the calendar year. Some employers may offer a grace period extending into 2025 or allow a limited rollover amount. Reviewing your FSA balance and planning any necessary medical or dependent care expenses before year-end can help you avoid forfeiting unused funds.
Education Savings Contributions
While contributions to 529 college savings plans do not have a hard deadline, making contributions by December 31, 2024, may help maximize any state tax benefits available to you. Each state has different rules. For example, in South Carolina the deadline for making contributions is April 15th, 2025. Be sure to check the specific details for your plan.
Gifting and Estate Planning
The annual gift tax exclusion for 2024 is $18,000 per individual. Gifting up to this amount per recipient before December 31, 2024, may reduce the taxable value of your estate without impacting your lifetime gift tax exemption. For couples, the exclusion doubles to $36,000 per recipient if split gifting is elected.
One strategy is to give gifts to your children. According to Ballentine’s “Wealth on Purpose”, you may want to consider giving your children stock instead of cash. For additional strategies give Ballentine Capital Advisors a call.
Planning for Estimated Tax Payments
For those who pay estimated taxes, the fourth-quarter payment for 2024 is due on January 15, 2025. Reviewing your tax liability before year-end may help ensure that you have paid sufficient estimated taxes to avoid penalties.
Final Thoughts
Taking proactive steps to meet these year-end deadlines may provide financial clarity as you transition into the new year. With careful planning and attention to these key areas, you can approach 2025 with confidence.
Sources located at the bottom of the article
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Sources:
- IRS Retirement Plan Contribution Limits for 2024
- IRS Required Minimum Distributions
- Health Savings Account (HSA) Limits for 2024
- 529 Plan Tax Benefits by State
- Annual Gift Tax Exclusion for 2024
- Ballentine, B. (2024). Wealth with Purpose: Your Path to Protect, Prosper, and Prevail. Amazon.
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This material is prepared by Ballentine Capital Advisors for informational purposes only. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation or any particular security, strategy, or investment product.
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