Tag: Roth IRA

Year-End Tax Planning 2025

The countdown to year-end will begin soon. With nearly four (4) months remaining in 2025, consider the following Year-End Tax Planning Checklist.*  Several of these items, if addressed now, could make a meaningful difference come tax filing season AND add to savings.

  1. How are you doing on maxing out your 401k? Many people do not know they can temporarily increase their 401k contributions through December 31st to reach the $23,500 maximum contribution (higher max for those age 50, and even higher for those age 60-63).
        • Lots of 401k or 403b plans allow participants to contribute 25-30% of pay – or even 100% of pay (100% can be a temporary measure in order to max out for 2025).
        • These 401k contributions can be tax-deductible, unless you are contributing to a Roth 401k. It is not too late!

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Actionable Tax & 401k Info

Compelling statistic–

Three recent editions of TGIF 2 Minutes were at or near the “all-time most read”. ALL THREE editions covered mostly basic topics related to personal finance. Here they are:

3. “Decluttering Financially & In Real Life”
2. “Timely Tax & 401k Info”
1. ….and the all-time most read TGIF 2 Minutes in 11 years (drum roll, please) was “Reining In the Amount Your Kids Spend”.

Of these, #1 was not shocking, and #2 is still actionable. Please check out the following abbreviated points (originally published on August 30, 2024).

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Timely Tax & 401k Info

At this time of year, it makes a ton of sense to focus on how best to maximize 401k accounts and which year-end tax considerations can be meaningful for tax year 2024. There is still plenty of time remaining in 2024 to make a difference.

Remember that Roth *401k* plans have slightly different income requirements than Roth IRA accounts:

  • Roth 401k accounts have NO income limits.
  • Roth IRA accounts DO have income limits.

Advice for higher earners who no longer qualify for Roth IRA accounts: make sure to utilize the Roth 401k to some extent, if your company offers a 401k plan with the Roth option. Also remember that Roth 401k contributions are made after-tax, whereas regular or traditional 401k contributions are made pre-tax.

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Mid-Year & Critical Decisions

Mid-Year is an important time to review several significant saving and spending decisions, possibly affecting taxes too. There are slightly over 6 months remaining in the tax year – enough time to make a meaningful difference. Consider:

  • Amounts being deferred from compensation pre- or post-tax into 401k and other retirement accounts (and whether to max out?)
  • Savings goals versus reality
  • Savings goals in need of formation from scratch
  • College savings account contributions
  • Creating and funding Trusts

These and other important decisions can be evaluated and adjusted with just over half a year remaining to accomplish goals or mini-goals.

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Tax Season Time Crunch

It is tax season, which means time is at a premium. TGIF 2 Minutes is designed for this concept. Therefore, a 1-minute read today!

Preparing tax documents, expense spreadsheets, records of charitable deductions, W-2 forms, 1099’s, K-1’s and all the rest can really be a hassle. Here are a few bright spots:

  • Learn something right now this year from every time you find yourself saying, “I am going to do this differently next year!“
  • Whether it is your filing system for tax documents and charitable deductions or set-up of online folders for rental property files, go overboard with keeping better track along the way, starting now for tax year 2024.
  • Make sure to ask your financial adviser about tax loss harvesting this calendar year. Last year there were UP months in markets and DOWN months. Make sure your adviser is possibly using the market’s down months to a tax advantage in non-IRA accounts.
  • If it is not already obvious, have a CPA.
  • Ask your financial adviser for assistance in compiling or finding tax documents. This task is always something with which I am happy to assist – with advance notice – for my clients.
  • Look at ways to make changes and tweaks to the way you are contributing to 401k and IRA accounts while it is still early in 2024. Changes can involve:
  • increasing/decreasing contribution rate
  • creating a mix of before- and after-tax (Roth) contributions
  • spreading contributions over the course of the entire year
  • Consider Roth IRA conversions in 2024.

Tax time is not always the most pleasant time of the year but all we can do is make the best of it. Thank you for all the positive feedback in recent weeks!

This material has been prepared for informational purposes only and is not intended to provide, and should not be relied upon for, tax, legal or accounting advice.

More Year-Ahead Tax Planning

Following on last week’s 2023 Year-End Tax Planning come several key tax moves to consider over the next year or two. These moves do NOT need to be made by year-end 2023 but still need to be top of mind, especially for those in higher tax brackets and those having accumulated significant savings.

Plus, for those approaching retirement and looking to accumulate tax-free monies down the line, there are considerations too. Why bring up this topic now? Because the 2017 tax cuts, set to expire in 2025, did lower the top tax bracket AND expanded the very reasonable 24% tax bracket. Use the lower brackets while they still exist.

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Year-End Tax Planning 2023

Year-end tax planning is a sort of double-event this year, due to 1) the approaching 2023 year-end, and 2) the 2017 TCJA tax cuts expiring at the end of 2025 (sooner than it sounds) – meaning limited time to take advantage of Roth IRA conversions and certain gifting strategies. There are a number of items and trust strategies that can be planned in advance. This week will be Part 1 and next week Part 2.

Part 1 includes basic, yearly items that can be addressed in these final months of 2023:

  1. Have you maxed out your 401k? Many people do not know they can temporarily increase 401k contributions through December 31st to reach the $22,500maximum contribution (those age 50 and older get an extra $7,500 catch-up contribution, for a total of $30,000). Lots of 401k or 403b plans allow participants to contribute 25-30% – or even 100% of pay – and then revert to a lower contribution rate on January 1st of next year.
  • These 401k contributions can be tax-deductible unless you are contributing to a Roth 401k (which can be an excellent idea too).
  • It is not too late!

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Tax Traps, Part 1

Talking taxes on a Friday is a lot easier than talking taxes on a Monday! Believe it or not, at this time of year it is smart to be talking taxes no matter what. Preparation and planning are the name of the game.*

The issue of higher FUTURE taxes is critical to clients of all income levels – especially those in higher tax brackets – and all ages. You will hear me repeatedly hammering home this “tax trap” issue – with the research and collaboration from my sources to back it up.

Here is some “good” news when it comes to taxes and tax strategies: the Roth IRA, Roth IRA conversion and Roth 401k are alive and well for now. The “good” part is that for nearly ALL reading this, you ARE eligible for both the Roth IRA conversion and the Roth 401k (if your company offers a Roth 401k) even if you are in the higher/highest income brackets or own a business! And these strategies can be employed NOW for 2020 and 2021.

The issue of higher FUTURE taxes is critical to clients of all income levels, especially those in higher tax brackets
Photo by Karolina Grabowska on Pexels.com

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2020 Contribution and Gift Limits

A handful of updates for 2020 IRA & 401k contribution and gift limits:

  • For Traditional IRAs and Roth IRAs the 2020 contribution maximum remains the SAME in 2020 as in 2019: $6,000 (plus $1,000 to total $7,000 for those age 50 and over).
  • REMEMBER!! IRA account contributions can be made all the way up until April 15th for the previous tax year.
  • That means that you have until April 15, 2020 to make an IRA contribution for 2019.

cash dollars hands money
Photo by Pixabay on Pexels.com

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Time is Running Out

There are just twelve business days remaining in December. If you are realistic about the number of days remaining to transact actual business, it is more like eight days. Use these eight days wisely!

shallow focus of clear hourglass
Make the most of the last eight to twelve days of December.

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