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 adjustments to have an impact, and taxes are seemingly prime of thoughts with shoppers. 

Listed here are some issues to contemplate for shoppers’ tax and monetary planning for 2024 and past.

Projected 2024 Earnings

A primary step is to have a look at shoppers’ projected revenue for 2024. This may information a variety of tax planning duties throughout the realm of their total monetary planning for the yr.

A great place to start out is to evaluation their 2023 tax return. Will their 2024 revenue scenario be comparatively the identical, or will it’s considerably greater or decrease? Modifications within the quantity of funding revenue, compensation from their job and a bunch of different issues might be altering for 2024. Do shoppers 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 revenue for the yr.

Retirement Earnings Planning

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

For shoppers whose revenue can be decrease than in previous years, it may well make sense to faucet a conventional particular person retirement account or 401(okay) to cowl some or all of their revenue wants for the present yr and scale back the affect 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 by way of diminished RMDs.

Conditions could also be completely different subsequent yr or in subsequent years, so this evaluation must be revisited every year for shoppers who’re in or close to retirement.   

RMDs

Whether or not shoppers 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 scenario for the yr.

For shoppers who can be taking their RMD in 2024, take into account a professional charitable distribution for all or a part of their RMD quantity. Any portion of an RMD made by way of a QCD won’t be taxed. This distribution might be taken as early as age 70.5 and might function each a tax-efficient approach to make charitable contributions and a approach to scale 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 similar 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 may help scale back future RMDs till distributions are taken. 

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