2024 Tax Planning Roadmap | Gift Estate Planning | OH IN KY

Your Tax Planning Roadmap for 2024

Published on by Wendy Holloway in Estate Planning, Tax Services

Your Tax Planning Roadmap for 2024

As 2023 draws to a close and 2024 looms large, now is a great time for strategic tax planning. This tax planning guide is designed to help individuals and businesses efficiently plan taxes, minimize tax liability, and avoid penalties and audits.

First, some important questions to consider

  1. Have you been involved in any significant transactions this year, such as making new investments, receiving an inheritance, experiencing casualty loss, or business success or failure?
  2. Do you know how much capital gain or loss you can take before the year-end?
  3. Do you usually make charitable contributions?
  4. Do you receive income from a pass-through business?
  5. Have you calculated how your income will change in 2024?
  6. Finally, do you have any carryover losses, deductions, or transactions from 2022 that need to be considered?

Tax planning strategies to minimize your tax liability

Several key tax planning strategies can help minimize your tax liability: deferring income, accelerating deductions, generating losses or matching losses with gains, and managing income classification. To determine which of these strategies may be appropriate for your situation, consult with a qualified tax professional.

If you have an S Corp

It is important to review your basis in S corporation stock and partnership interest to allow for losses and assess the impact of Section 163(j) limit to business interest expense.

It may be advantageous to consider gain deferral by investing in a Qualified Opportunity Zone Fund or to engage in a like-kind exchange for real property transactions.

Calculating the potential Section 199A deduction can help you maximize compensation planning and optimal business structuring. It’s also important to assess the potential impact of Alternative Minimum Tax (AMT) and Net Investment Income Tax (NIIT) and to acquire and claim tax credits.

Other checklist items

Considering these items can help prevent an April surprise balance due and maximize your tax savings.

  • Evaluate the impact of 2024 income/deductions on actions in 2023
  • Confirm year-to-date withholding and estimated tax payments.
  • Calculate the tax due for the fourth quarter of the tax year and for the annual tax filing deadline of April 15th.
  • Consider investments in assets eligible for 80% bonus depreciation in 2023, including real estate through a cost segregation study.

Tax Planning with IRAs

Here are some important things to keep in mind regarding traditional IRAs:

  • People of any age can contribute to traditional IRAs.
  • If you turn 73 in 2023, you’ll need to take your first Required Minimum Distribution (RMD) by April 1, 2024.
  • In 2023, you may not have to take RMDs from inherited IRAs.
  • You can contribute the maximum amounts to your IRA, profit-sharing plan, 401(k), and employer retirement savings plans.
  • You can make qualified charitable contribution distributions from your IRA funds of up to $100,000 if you are 70 1/2 years old or older. This limit will increase to $105,000 in 2024.
  • You can convert a traditional IRA or qualified plan amounts to a Roth IRA. You’ll need to pay tax now, but it will help you enjoy tax-free earnings and avoid RMDs in the future.

Gifts and Estate Planning

When gifting assets to family and others, there are several strategies to consider.

Choose assets with a low value to shift any appreciation out of the estate to the recipient.

When planning for gifting, it’s advisable to make the best use of the lifetime exclusion before its expected decrease at the end of 2025. It’s important to consider the type of gift, whether it is an outright gift, a gift in trust, or through the Uniform Transfers to Minors Acts (UTMA). If you choose to transfer an asset, it’s recommended to report the carryover basis to the recipient.

Additionally, it’s crucial to ensure that all payments are made directly to the facilities and not to the individual. Additionally, frontloading gifts Section 529 plans and Achieving a Better Life Experience (ABLE) accounts with up to five years’ worth of annual exclusion can be beneficial.

Here are a few other items to consider:

  • Refresh your estate plan and accelerate transfers now, as the lifetime exclusion is at an all-time high.
  • Review trust documents that are five years old or older to ensure that the terms accomplish current family goals and that the law hasn’t changed.
  • Consider turning off grantor trust powers and exploring flexible options for managing income, cash flow, and donations. Also, know your tax basis and use strategies for deferring tax gains.
  • Consider charitable contribution strategies, such as charitable remainder annuity trusts and unitrusts, and review beneficiaries of individual retirement accounts (IRA) for estate tax planning.
  • Consider endgame strategies for closely held businesses, estimate current values of distressed assets create action plans for these assets, and review retirement plans and legacy plans.

Tax Planning with Trusts

When considering discretionary trust distributions, it’s important to keep these things in mind:

The fiduciary top tax rate is 37% on income over $14,450. This is in comparison to the top individual tax rate, which is $693,750 for Married Filing Jointly and $578,125 for Unmarried individuals.

To make distributions in early 2024, it’s important to remember the 65-day rule which is outlined in Section 663(b). Making distributions can help minimize or eliminate NII tax to Trust.

When dealing with existing trusts, it’s important to address potential issues such as depressed asset values, reduced dividends and earnings on trust assets, and whether the trust can make note payments. Additionally, it’s important to check if the agreement allows donors to exchange assets and if the donor can create a new trust to acquire old trust assets under new note terms. Lastly, consider asset preservation insurance.

Final Advice – 2023 Tax Payments

Performing a thorough review of your taxes withheld and estimated payments made thus far this year is a crucial step to ensure that you don’t incur underpayment penalties or overpay in April 2024.

It’s worth considering adjusting these figures, as well as your tax withholding from sources such as wages or IRA RMDs. Opting for electronic deposits for federal and state tax payments is another viable option. Finally, be sure to factor in your first quarter 2024 estimated tax payments to avoid any surprises down the line.

Where to go from here

Again, talk with a qualified tax provider to determine which of these strategies could be a fit for your situation. You might also be interested in top estate planning tools to consider now, how grantor trusts can help maximize your wealth, and changes to Irrevocable Grantor Trusts and their impact on beneficiaries. You can also watch on-demand as Barnes Dennig’s top tax pros unpack key strategies for preparing for economic uncertainty in our Signature Tax Event.

If you have questions about tax strategies or estate planning, contact us for a free consultation with one of our top tax pros. As ever, we’re here to help.


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