Lost Time
Our family tradition is to acquire our Christmas tree the weekend after Thanksgiving. We typically store it in the garage for a week and then bring it inside the first weekend of December to decorate it.
Not this year. This year was an “express” year. Due to the tardiness of Thanksgiving, the tree went straight from the vehicle into the living room because Sunday was already December 1. As of this writing, decorating it is still on our to do list.
You also may be feeling that somehow you have lost a week in your holiday preparations. This feeling also applies to your year-end financial tasks.
In fact, December 6 is the last day that LPL Financial will guarantee year-end processing for your last minute, should-have-done-it-sooner 2024 financial transactions. After December 6, they will be completing every requested transaction on a best-efforts basis and we can only offer you glorified hope that it will be completed by December 31.
Here is our top five list of most commonly requested year-end transactions:
1. Donating an appreciated asset to a charity. If you will be itemizing deductions in 2024, donating an appreciated investment to charity allows you to avoid paying capital gains taxes and claim the deduction. Even if you are not itemizing, donating appreciated assets can still help you avoid capital gains taxes.
2. Fulfilling your Required Minimum Distribution (RMD). If you are over age 73 or own an inherited retirement account, you are likely subject to RMDs. Failing to take your RMD could result in a 25% federal penalty.
3. Making a Qualified Charitable Distribution (QCD). If you are over age 70.5, you are allowed to donate up to $105,000 per year directly from your IRA to a charity in 2024. While this strategy may be more valuable if you are not itemizing your deductions, there is minimal downside to keeping your Adjusted Gross Income lower by using a QCD. A QCD also fulfills your RMD.
4. Implementing a Roth conversion. If you think your or your children’s income tax rates may be higher in the future than they are today, your tax professional may recommend converting a portion of your traditional IRA to a Roth IRA for future tax-free growth. The downside is that you will end up paying some income taxes in 2024 that you could have deferred to the future.
5. Gifting. Each taxpayer is permitted to gift up to $18,000 to another person in 2024 without filing a gift tax return. If the gift giver is in a higher tax bracket than the gift receiver, it may make sense to gift an appreciated asset instead of cash.
As always, please be sure to check with your tax professional to see if you would benefit from any of these strategies. Everyone’s tax situation is different.
This is the last call for 2024. If there are items on your to do list that need to get done by December 31, get them started today before you lose more time.
Quote of the week: Napoleon Hill: “Procrastination is the bad habit of putting off until the day after tomorrow what should have been done the day before yesterday.”