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Saturday, March 16, 2024

It’s Not Too Early to Begin 2024 Tax Planning

What You Have to Know

  • A superb first step is to evaluate purchasers’ probably tax conditions and what, if something, might be totally different from 2023.
  • In lots of instances, tax and monetary planning for the present 12 months can have an effect on future years.
  • Contemplate taking steps now to cut back future RMDs, comparable 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 12 months, it’s a superb time to consider tax planning for 2024. It’s early sufficient within the 12 months 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 earnings for 2024. This can information a variety of tax planning duties inside the realm of their general monetary planning for the 12 months.

A superb place to begin is to overview their 2023 tax return. Will their 2024 earnings state of affairs be comparatively the identical, or will it’s considerably larger or decrease? Adjustments within the quantity of funding earnings, compensation from their job and a number of different issues could possibly be altering for 2024. Do purchasers have a concentrated place in firm inventory that might set off taxes in 2024 as they try and diversify this place? Any variety of issues might change for 2024 leading to a better or a decrease projected earnings for the 12 months.

Retirement Revenue Planning

Purchasers’ projected tax state of affairs for the present 12 months must be a key consideration of their retirement earnings technique for 2024. Purchasers within the hole interval earlier than taking Social Safety and earlier than beginning required minimal distributions usually have a level of flexibility when it comes to which accounts to faucet and when to generate retirement earnings.

For purchasers whose earnings might be decrease than in previous years, it may possibly make sense to faucet a conventional particular person retirement account or 401(okay) to cowl some or all of their earnings wants for the present 12 months and scale back the influence of RMDs in future years. In different phrases, they are going to pay taxes now when the remainder of their earnings is comparatively low to save lots of taxes later through lowered RMDs.

Conditions could also be totally different subsequent 12 months or in subsequent years, so this evaluation must be revisited every year 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 based mostly on their projected tax state of affairs for the 12 months.

For purchasers who might be taking their RMD in 2024, think about a certified charitable distribution for all or a part of their RMD quantity. Any portion of an RMD made through a QCD won’t be taxed. This distribution might be taken as early as age 70.5 and might function each a tax-efficient solution to make charitable contributions and a solution to scale back future RMDs. 

One other RMD planning choice is the buy of a certified longevity annuity contract as much as $200,000 (listed for inflation) in a certified retirement plan account comparable to a 401(okay) or IRA. Annuity funds should begin by age 85. The annuity contract permits the cash used to buy it to be excluded from RMDs till funds begin. Whereas not one thing that may have an effect on the 12 months of the acquisition, QLACs will help scale back future RMDs till distributions are taken. 

Beside the tax profit from decreasing RMDs, the annuity contract could be a deferred supply of retirement earnings in later years.

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