December 2024
Financial Planning

Year End Tax Planning and Beyond

By Myra Alport, AFC®

As 2024 comes to a close, it’s a great time to consider tax strategies while working toward your personal financial goals. At Copperwynd, we have been working on many of these planning items throughout the year for you. They include:

Tax Loss Harvesting

Tax loss harvesting is a strategy that allows us to sell holdings held in taxable brokerage accounts that are down in value to reduce capital gains taxes owed from selling profitable holdings. We use this tax strategy most often near year end when we assess how well your investments have performed and the potential impact on your taxes.

Required Minimum Distributions (aka RMDs)

If you have reached age 73 or greater this year, we make sure you have taken your Required Minimum Distribution before Dec 31 to avoid any penalties. This also applies to Inherited IRAs*.

Qualified Charitable Distributions (aka QCDs)

If you are charitably inclined, at least 70-1/2 years of age and an IRA owner, we suggest making a tax-free donation to qualified charities directly from your IRA. Instead of writing a check to your favorite organizations, we submit your request to Charles Schwab, who will issue the check(s) on your behalf. Saves on the cost of postage too! The QCD is not included in your taxable income, and it also counts toward meeting your RMD.

Roth Conversion Opportunities

Requesting a copy of your tax return allows us to weigh the benefits of converting a portion of your traditional IRA to a Roth IRA to lock in lower tax rates in the future. Roth IRA contributions and earnings grow tax-fee when withdrawn in retirement. Roth conversions are also beneficial for wealth transfers to your beneficiaries because they won’t be taxed on distributions.

Looking Ahead – Your Money Moves for 2025

As we step into 2025, it’s the perfect time to hit refresh on your finances and set yourself up for success. Whether you're looking to grow your savings, pay down debt, or make progress toward a big goal, here are some simple yet powerful steps you can take:

Reflect on 2024

What worked for you financially and what didn’t? Did you hit your savings goals or overspend in certain areas? Understanding where you’ve been is key to deciding where you want to go and how to get there.

Set Clear Goals

What do you want your money to do for you in 2025? Write down your top three financial priorities and break them into actionable steps over the course of the year.

Review Your Spending

Did some unexpected expenses cause you to go off-course in 2024? Do you need to build a larger emergency fund or a strategy for paying off debt?

Maximize Your Tax Strategy

Tax season will be here before you know it. Here are some ideas for getting off on the right foot:

• Max out retirement plan and Health Savings Account contributions.

• Make your 2024 IRA or Roth IRA contribution by April 15, 2025.

• Use up your Flexible Spending Account dollars before the deadline.

• Review your federal and state tax withholdings to make sure you’re not under or over withholding. Did you know that you can withhold federal taxes from your Social Security payments? You can have 7%, 10%, 12% or 22% withheld for taxes by submitting Form W-4V Voluntary Withholding Request.

• Contribute to a Health Savings Account (HSA) if offered by your employer.

• Consider a Donor-Advised Fund (DAF) - A DAF is a charitable giving account that offers an easy and tax-efficient way to donate to your favorite causes. Think of it as your personal charitable fund, where you can contribute assets, get an immediate tax deduction, and then recommend grants to nonprofits over time.

Gifting

Clients have asked us for meaningful ways they can help family members financially without incurring estate gift taxes. The 2025 gift tax exclusion is $19,000. That means an individual can gift up to $19,000, or a married couple can gift up to $38,000, per recipient. Staying below these IRS limits exempts the donor from filing a gift tax return and the recipient does not have to pay taxes on the gift.

*Inherited IRAs

Starting in 2025, new rules for inherited IRAs require that most non-spouse beneficiaries withdraw all assets from the account within 10 years of the original owner’s date of death if on or after January 1, 2020. We will reach out to you directly to discuss your options. Distributions from inherited IRAs are taxed as ordinary income.

Let us know how we may assist you in achieving your 2025 goals!

MARKET UPDATE
401(K) ALLOCATION

To download the December 2024 Newsletter: CLICK HERE

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