It is important to us that our family of clients approach tax season on the right foot. In 2024, we are highlighting our tax planning tips. We hope you find this to be a helpful guide.

Get Organized

The end of the first quarter is in sight, and so too is 'Tax Day' on Monday, April 15. Tax season can be stressful for many, but it doesn't have to be with preparation and a simple plan. Whether you work with a tax preparer or file your taxes yourself, following an organized checklist while leveraging tips to accelerate portfolio savings in a tax-friendly way can be highly impactful.

Gathering all applicable tax documentation and reviewing each for reporting accuracy before you start filing your tax return or meeting with your tax professional is critical. While your personal income tax filing documents may vary from the typical taxpayer's, the following is an abbreviated list that will apply to most.

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Personal Information

• Social Security Number – For you and your dependents, if applicable
• Bank account and routing number – If you plan on depositing your refund directly into your account or transferring funds from your account to make an IRS or state tax payment
• Copy of last year's tax return – Not required, but helpful to have as a point of reference

Income Information

• W-2 Forms – From your employer(s)
• 1099 Forms – For interest, dividends, and distributions from banks/brokerage firms
• K-1/K-2/K-3 statements – From partnership interests held (*work with your tax professional to file an extension if you have K-1s that won't be released until Spring)

Miscellaneous Information (if applicable)

• 5498 Form – When HSA / IRA contributions, IRA rollovers, or IRA conversions have been made (your custodian will make these available in Q2)
• 1098 Form – Mortgage interest from your lender(s)
• 1098-E Form – Student loan interest from your lender(s)
• 1095 Form – To ensure your health insurance plan meets Affordable Health Care Act requirements

Be certain to aggregate your information and documentation well ahead of the deadline. You want to ensure that your tax preparer can handle your return promptly.

Traditional IRA

One way to potentially reduce the taxes owed for 2023 (or to increase your refund) is to contribute to a tax-deferred account, like a traditional IRA, if you haven't already done so. Many taxpayers don't know they can contribute to a traditional IRA for the 2023 tax year before the tax filing deadline on April 15, 2024. Consult your tax professional to understand the IRS requirements to confirm if your traditional IRA contribution for 2023 is eligible for the 'above-the-line' federal tax deduction.

Health Savings Account (HSA)

Using a tax-advantaged account, such as a Health Savings Account (HSA), is another opportunity to take advantage of potential tax savings if IRS eligibility requirements are met. Remember, you must be enrolled in a high-deductible health plan (HDHP) to be eligible to open and contribute to an HSA. If you are part of your employer's HDHP, you can elect to contribute pre-tax dollars directly from each paycheck. If this is unavailable through your employer, you can make post-tax contributions and claim an 'above-the-line' tax deduction on your federal tax return.

Roth IRAs

Catch up on missed retirement saving opportunities for 2023 using a Roth IRA. Up until the tax filing deadline on April 15, 2024, you can contribute to a Roth IRA for the 2023 calendar year; this will not curtail your ability to make a 2024 contribution (which can be made through April 15, 2025). Please note that your income must not exceed the eligible annual earned income threshold dictated by IRS guidelines. The appeal of a Roth IRA is that the contributions are made with after-tax funds (thus non-deductible) while growing tax-free if IRS guidelines are met.

Know Your Contribution Limits

For 2023, your total contributions each year to all your traditional IRAs and Roth IRAs can be at most $6,500 ($7,500 if you're 50 or older). In 2024, these limits are $7,000 or $8,000, with a catch-up contribution if you are 50 or older. The modified adjusted gross income or MAGI limitations to be aware of with Roth IRA contributions are:  

• For 2023, the income phase-out for single filers starts at $138,000, as are those who file married filing jointly and have modified adjusted gross income above $218,000.
• For 2024, the income phase-out for single filers starts at $146,000, as are those who file married filing jointly and have modified adjusted gross income above $230,000.

Please see additional information related to this topic on the IRS website.

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Under current rules, the 2024 federal lifetime gift & estate exemption is $13.61 million per individual, or if you file your taxes with your spouse as married filing jointly, it is $27.22 million. Assets left at death over this current exemption amount are taxed at a federal rate of 40%. The exception being assets endowed to IRS-approved charities or a spouse (assuming they are a U.S. citizen), transfers covering another individual's qualifying medical and education expenses (tuition only) as long as payments are made directly to the healthcare provider or accredited educational organization.

This high threshold creates a unique opportunity where individuals can strategize and shift assets out of their taxable estate during their lifetime and into the hands of their heirs, either outright or over time, or directly or indirectly utilizing trusts. Many use irrevocable gifting to carry out their estate strategies tax-efficiently. The latter would require relinquishing control of these assets, which we would refer to as 'putting assets in a box, locking it, and throwing away the key.' That said, doing so requires a necessary discussion related to one's assets to fully enjoy their retirement years while also weighing the impact of gifting for one's legacy intentions.

The current federal exemption amount is a continuation of legislation passed in 2017 that has been keeping up with the inflation rate and, thus, steadily increasing. As it stands, if left unaltered, these rules are due to 'sunset' or revert to previous levels (while being adjusted for inflation as well). The deadline is December 31, 2025. An important decision for many investors is whether to capitalize on this window of opportunity. This exemption is politically influenced, given that it is an election year, and there are many discussions about what presidential candidates may legislatively enact in the future, especially in light of an increasing federal budget deficit.

It's important to verify if you've utilized any of this exemption amount to date and, if so, how much (substantiated on Form 709). You can partner with your estate planning attorney and Main Street Research to discuss whether this is an option for you and your family.

Please let us know if you have a family member or friend who would benefit from our wealth planning services.

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Disclosures: This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction or tax matters.

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