By Jeff Wolfe, Senior Vice President and Manager, Wealth Planning Strategies
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You’ve made it! You’ve either filed your taxes or an extension by the end of today, and tax season is over. This series has covered many topics which may or may not see significant changes in 2025. As discussed, the current income tax laws are scheduled to revert to pre-2017 brackets and rates at the end of this year unless Congress acts otherwise. There are many other changes that will affect taxpayers as well. As such, while the brief sense of relief with the 2024 tax season ending is great, it’s time to review your strategies and your tax situation for 2025. Consider consulting with your tax professional and your financial advisor on how to be nimble with this coming unique tax year. For example:
- Did you get a 1099-R, or do you expect one this year? Make sure you understand how to deal with these various retirement account distribution transactions.
- Be sure to review your family situation to optimize total tax benefits.
- With the fact that tax laws will change in some way (either reversion, extension or something else), scammers will be out in full force so stay diligent.
- Look at fully funding employer-sponsored plans and/or tax-deductible IRAs. Maximizing these contributions may lower your tax bracket. Small business owners with no existing employer-sponsored retirement plan should consider establishing one and taking advantage of generous tax credits introduced by recent legislation to help small business owners with some of the startup costs for retirement programs.
- Review Roth retirement planning options. Converting existing pre-tax assets to a Roth IRA, funding a Roth IRA, or, if it is available, use Roth salary deferral contributions through your 401(k), 403(b) or 457(b) plan now. These techniques may provide more after-tax cash flow during retirement. Recall, though, once you make a Roth conversion, it cannot be undone.
- Consider tax-advantaged annuities for another deferral strategy.
- Think about the location of your assets. Perhaps mutual fund investments are more pragmatic in a tax-deferred account than a taxable account for your situation.
- For higher income earners, review your withholdings and your passive investments, and make sure you address any potential Affordable Care Act Taxes or the cap on your state and local tax deductions.
It’s often stated that death and taxes are two guarantees in life. This year, change is another guarantee as Congress must decide to proactively modify the current tax regime, or let it lapse to pre-2017 rules. Stay diligent and review your situation with your tax advisor and your financial advisor throughout the year to put together a plan that is right for you.
IMPORTANT DISCLOSURES: The information provided is based on internal and external sources that are considered reliable; however, the accuracy of this information is not guaranteed. This piece is intended to provide accurate information regarding the subject matter discussed. It is made available with the understanding that Benjamin F. Edwards is not engaged in rendering legal, accounting or tax preparation services. Specific questions on taxes or legal matters as they relate to your individual situation should be directed to your tax or legal professional.