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Sunday, April 14, 2024

It’s Not Too Early to Begin 2024 Tax Planning

What You Must Know

  • An excellent first step is to evaluate purchasers’ probably tax conditions and what, if something, will likely be totally different from 2023.
  • In lots of circumstances, tax and monetary planning for the present yr can have an effect on future years.
  • Think about taking steps now to scale back future RMDs, akin to making a Roth conversion, shopping for a QLAC or taking a QCD.

Whereas we’re within the coronary heart of tax season for the 2023 tax yr, it’s a great time to consider tax planning for 2024. It’s early sufficient within the yr for any modifications to have an impact, and taxes are probably prime of thoughts with purchasers. 

Listed below are some issues to contemplate for purchasers’ tax and monetary planning for 2024 and past.

Projected 2024 Revenue

A primary step is to have a look at purchasers’ projected revenue for 2024. It will information a variety of tax planning duties inside the realm of their total monetary planning for the yr.

An excellent place to begin is to assessment their 2023 tax return. Will their 2024 revenue scenario be comparatively the identical, or will or not it’s considerably greater or decrease? Adjustments within the quantity of funding revenue, compensation from their job and a number of different issues might be altering for 2024. Do purchasers have a concentrated place in firm inventory that would set off taxes in 2024 as they try to diversify this place? Any variety of issues might change for 2024 leading to a better or a decrease projected revenue for the yr.

Retirement Revenue Planning

Purchasers’ projected tax scenario for the present yr must be a key consideration of their retirement revenue technique for 2024. Purchasers within the hole interval earlier than taking Social Safety and earlier than beginning required minimal distributions typically have a level of flexibility by way of which accounts to faucet and when to generate retirement revenue.

For purchasers whose revenue will likely be decrease than in previous years, it could make sense to faucet a standard particular person retirement account or 401(okay) to cowl some or all of their revenue wants for the present yr and cut back the impression of RMDs in future years. In different phrases, they’ll pay taxes now when the remainder of their revenue is comparatively low to avoid wasting taxes later through lowered RMDs.

Conditions could also be totally different subsequent yr or in subsequent years, so this evaluation must be revisited annually for purchasers who’re in or close to retirement.   


Whether or not purchasers are on the age the place they should take their RMDs or have a number of years till that point, there are some planning steps to contemplate primarily based on their projected tax scenario for the yr.

For purchasers who will likely be taking their RMD in 2024, contemplate a professional charitable distribution for all or a part of their RMD quantity. Any portion of an RMD made through a QCD is not going to be taxed. This distribution might be taken as early as age 70.5 and might function each a tax-efficient strategy to make charitable contributions and a strategy to cut back future RMDs. 

One other RMD planning choice is the buy of a professional longevity annuity contract as much as $200,000 (listed for inflation) in a professional retirement plan account akin to a 401(okay) or IRA. Annuity funds should start by age 85. The annuity contract permits the cash used to buy it to be excluded from RMDs till funds start. Whereas not one thing that can have an effect on the yr of the acquisition, QLACs will help cut back future RMDs till distributions are taken. 

Beside the tax profit from reducing RMDs, the annuity contract generally is a deferred supply of retirement revenue in later years.

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