Episode 249: Year-End Financial and Tax Moves

What Financial Moves Should Women Prioritize as 2024 Comes to a Close?

As the year winds down and the political landscape shifts under the anticipated policies of President Trump, Melissa Joy, CFP®, CDFA®, unpacks the key financial strategies women should focus on to optimize their year-end planning. With potential changes to tax policies—including adjustments to the standard deduction and estate tax limits—Melissa offers expert insights to help you navigate the complexities and prepare for a prosperous 2025.

This episode dives into actionable tactics, from maximizing retirement contributions to making strategic property tax decisions, all aimed at setting a strong financial foundation. Additionally, Melissa explores innovative ways to maximize your charitable giving, leverage tax advantages, and celebrate your financial achievements during this reflective season.

Key Takeaways:

• Navigating Potential Tax Changes: Understand how upcoming shifts in tax policies, including the standard deduction and estate tax limits, might impact your financial plans and what steps you can take now to stay ahead.
• Year-End Tax Optimization Tactics: Learn how to maximize your retirement contributions, make strategic decisions about property tax payments, and take advantage of key deductions before the year ends.
• Smart Charitable Giving Strategies:
  • Explore the benefits of donor-advised funds and Qualified Charitable Distributions for retirees over 70½.
  • Discover how to utilize the $17,000 annual gift tax exclusion to benefit loved ones.
  • Consider gifting appreciated stock to reduce capital gains taxes while making a meaningful impact.
• Reflecting on Wins and Giving Back: Celebrate your financial achievements in 2024 and explore heartfelt ways to give during the holiday season that align with your values and goals.

Whether you’re preparing for changes in tax laws, planning your charitable contributions, or reflecting on your financial journey, this episode is filled with actionable tips to help you end the year strong and step into 2025 with confidence.

The previous presentation by PEARL PLANNING was intended for general information purposes only. No portion of the presentation serves as the receipt of, or as a substitute for, personalized investment advice from PEARL PLANNING or any other investment professional of your choosing. Different types of investments involve varying degrees of risk, and it should not be assumed that future performance of any specific investment or investment strategy, or any non-investment related or planning services, discussion or content, will be profitable, be suitable for your portfolio or individual situation, or prove successful. Neither PEARL PLANNING’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. PEARL PLANNING is neither a law firm nor accounting firm, and no portion of its services should be construed as legal or accounting advice. No portion of the video content should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. A copy of PEARL PLANNING’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://pearlplan.com/

Chapters

• 0:01 Year-End Financial Planning for Women
• 12:40 Strategic Charitable Giving and Financial Reflection

Transcript

Speaker 1: 0:01

Welcome to the Women's Money Wisdom Podcast. I'm Melissa Joy, a certified financial planner and the founder of Pearl Planning. My goal is to help you streamline and organize your finances, navigate big money decisions with confidence and be strategic in order to grow your wealth. As a woman, you work hard for your money and I'm here to help you make the most of it. Now let's get into the show.

Speaker 2: 0:36

How do you get prepared for the end of the year? That's going to be the topic of our episode today. We're talking all about year-end planning when it comes to your finances and financials, and so I know this is a really important topic, but I also know that for many of us, the time is short and fleeting, and so not only am I going to talk about what you should be doing now, before 1231, I'm also going to be discussing how to plan 2025 so that you can make the most of the new year as well, because if you're running behind this year, just move the calendar forward. Let's get started with a great 2025. Also, I am attending a conference this week in beautiful Colorado, so if you notice a different background, that's why, for those of you that are watching on YouTube video, but as we get started, I kind of wanted to break things down into three sections for year-end planning and then also, when we finish up, talk to you about what you should be doing for next year, because I think if you lay a good foundation now, you have a lot more opportunity for success than if you kind of put it off and wait, because there's no time like the present and also with, like, the boundaries of a new calendar year. It's really nice to set intentions. That's something that we're used to doing. I'm going to give you an update, to start, about what to be thinking about with technical tax things, because that always is impacted by the end of the year. We're also going to talk about retirement contributions. That goes right in with tax, but I think it deserves its own special segment, as well as gifting, which is, you know, something that you think about because of our holiday traditions but also can be financial gifts.

Speaker 2: 2:27

Tax professionals really were focused on the results of the 2024 election, both in Congress as well as the presidential election, for insights about what could potentially be coming in the future and coming next year. There were assumptions that if Democrats had more majorities, that there might be a changing tax landscape and with President Trump winning the election, that changes things, because we know what Trump's original tax policy was. He implemented the last significant tax changes. While there were some retirement adjustments during the Biden administration through a variety of pieces of legislation, the big deal was the Tax Cuts and Jobs Act which was enacted during the Trump administration. So conventional wisdom which, of course, is, you know, just a guess, but conventional wisdom is that it's not likely that we would see at least higher tax rates. There were some proposals for lower tax rates no taxes on tips, no taxes on social security, lower corporate taxes so all of these are possibilities, but when you look at your personal income tax rate, most people assume that for the very near future, there is not likely that it will not be likely that we'll be reverting back to the tax legislation that existed before the Tax Cuts and Jobs Act, which was somewhat higher depending on your circumstances, and it wasn't higher for everyone. But for many people and for many of you who are listening, the potential was that your tax rates could be going higher. Now there's one particular segment of the Tax Cuts and Jobs Act which was not necessarily beneficial to people making more money. The standard deduction went up. For when you just say, hey, here's a group of you know, just for being a taxpaying citizen, I get a standard deduction versus.

Speaker 2: 4:24

Many people would itemize prior to the previous legislation, the Tax Cuts and Jobs Act and you would itemize because you had big medical expenses that were more than a percentage of your income. Certain percentage of your income. Charitable deductions were part of that itemized calculation. Your mortgage interest was is also part of the calculation, but a big chunk of it, especially in certain states, can be state and local taxes, and so during the original Tax Cuts and Jobs Act it was perceived to be kind of a punishment to the coast, perhaps, or a way to pay for the tax, to reduce or cap the amount that you could deduct for your state and local taxes. And whereas for many people, if you look at your property taxes, income taxes that you pay in the state, sales taxes etc. Could have tens of thousands of dollars of taxes, especially wealthier people, that was capped at $10,000 and there was no indexing to inflation. This kind of had some blowback in Republican districts in blue states and just generally is more perceived to be a bipartisan issue of some preferences for perhaps changes. Maybe there will be a higher cap, there might not be a cap, or perhaps that cap would be tied to inflation, so it would be indexed, like many of the other rules are. And so that is something where I would say, if you have, for example, a property tax situation, you paid more than $10,000 in state and local taxes this year and you're planning to itemize, or if you already know that you're going to be subject to the standard deduction. You may want to put your property taxes that are due in January or February into 2025. So don't prepay them, and in the hopes that there might be different legislation whether it was in 2025 or into the future, so that's certainly something to consider.

Speaker 2: 6:25

Also, estate planners and tax professionals and people like myself have been very focused on the wealthiest segment of people and whether they might be subject to a lower estate tax limit. Nowadays it's in the $10 to $12 or $13 million range and that's indexed to inflation. It gets bigger every year. Per individual that you are exempt from federal estate tax, but the old legislation legislation would have cut that in half or more if we were to revert back, and so there was an anticipation that at the end of 2025, or most of this year and next year would be a scramble to do some estate planning to help people. While this higher exemption exists and that is much less likely, which is perhaps a good thing. It means less complexity and a lot less kind of hot air going in about estate taxes. There's still really important considerations for whether it's for the wealthiest segment of our population for estate taxes or just, you know, important and good estate planning in general, but I do want to want to mention that if you talk to an estate planning attorney and they said, hey, you may need to do some really serious adjustments, that conventional wisdom today says that's much less likely to be the case. So time will tell what changes occur.

Speaker 2: 7:54

I didn't bring into the tax discussion the potential for tariffs, but that can also have economic consequences. But the thing that I would emphasize the most is you need to be aware of your current tax circumstances and the impact that your different decisions have on those taxes. And the best way to do that if you yourself are just a natural and a savant when it comes to taxes is to have conversations with both your tax professional as well as your financial planner, so that you can get a good sense. Now, some financial planners or financial advisors don't really talk about tax, and if you're working with someone who doesn't, I just want you to know that there's other options, because I really think one of the most effective places to add value is through tax considerations of your financial decisions. That's just a really powerful mechanism for you to have more of your money and keep less of it for Uncle Sam in a very legal and straightforward fashion. So let's talk a little bit more about how you can control your taxes in these last few weeks of the year.

Speaker 2: 8:49

If you are eligible for a retirement plan, I want you to pull out your pay stub and if you have any paychecks left, just make sure that you've made the contributions that you thought you made. There's very little time or room for you to make much more. But please double check. Depending on the type of plan that you have, for example, 401k, you may be able to put away $23,000 or a catch-up amount that's higher in a $30,000 range. Double check because if you think you maxed but you really didn't, you might be able to make an adjustment in this last paycheck that you're going to be getting this year. It's even more important if you're self-employed, to make sure that you at least have your employee contribution if you have, for example, a solo 401k plan or you have your own 401k, even if you're going to be doing the calculations for your employer contribution into next year when you file your taxes.

Speaker 2: 9:41

But one of the best ways to control for taxes is to participate in many cases in your retirement plan. Of course, each retirement plan and each person's circumstances are different. But I would pound the table and encourage you to also look at what you've been doing and assess whether that is an effective amount or whether you need to increase your amounts if you haven't been maxing. Next year the there will be inflation adjustments in terms of how much you can put in, and we'll have a whole episode talking about how to kind of do your retirement planning. But I strongly encourage you to not only be active in making sure that you put in as much as you can before the end of the year, but also make a good game plan for next year. It's much more. It's much easier and more effective to make your contributions across the year than to scramble to make them at the end of the year, and that also can mean in many cases that you get the fullest benefit of matches, if those happen to be available for you. So retirement contributions do have some year-end deadlines and I think it's really important to be thinking about that right now. And, like I said, look at your pay stub for the year-to-date amount that you've set aside if you're in a plan that has that type of thing, if you're like. No, I generally make Roth or IRA contributions because I don't have a company retirement plan. You've got some time, so typically those types of contributions would be available until you file your tax return next year for 2024 taxes.

Speaker 2: 11:09

Moving along to an important topic that it seems like I'm talking with clients about more and more is two types of gifting. First of all, we have charitable giving and I just mentioned we have charitable giving and I just mentioned I kind of went into the reasons that standard deductions have been more prevalent recently, just because there are caps both a higher standard deduction as well as lower caps for some of the things that you would typically use to itemize. But charitable giving is one thing that goes into itemizing and in more and more cases we see clients using one of two strategies. The first, if you're under age 70 and a half, or 72 or 73, depending on when you started your required minimum distributions so if you're not a retiree, you're not in your 70s then utilizing a donor advised fund where you're able to give appreciated stock to charities can be a way to get a deduction once in a while or more frequently, where you also have a tax break, where you don't have to pay taxes on something you would otherwise sell to give cash to a charity, and so that can be a really powerful gift. It's a little bit complicated, but not that much. The reporting is pretty straightforward and not that much of a burden for you either. But if you are someone who does make regular charitable contributions or would like to increase those contributions over time, then that's something that I would strongly encourage you to discuss with your financial planner whether a donor advised fund may be a good fit for you.

Speaker 2: 12:40

Now, if you're writing checks for $50 or $100, first of all, I love that that you're giving to organizations that are important to you. But we're more typically talking about amounts in the $5, $10, $15, $20,000 range, although those amounts may be spread out over your gifts for multiple, multiple years. So I just wanted to distinguish who might be appropriate to discuss donor advised gifts Now. My other idea is for retirees. So if you're a listener, like many of our listeners are, this is something for your future, not today, but you may talk to your parents and they may mention a qualified charitable distribution from their retirement accounts and or a QCD, which is the you know short acronym for that and these gifts can be really powerful, and oftentimes my generous baby boomer clients who have gotten used to using that donor advised strategy may want to switch to a qualified charitable distribution strategy at the point in time where they're required to take money out of their retirement accounts.

Speaker 2: 13:42

So if you were to take money out of your IRA, let's say you had a required distribution of $10,000, which in most cases would mean that you would be reporting $10,000 of additional income on your taxes. If there was always $2,000 that you check, that you wrote to your church and you asked your retirement provider, your IRA provider custodian, to write that $2,000 check out of your IRA, then instead of needing to send it directly to the charity or give it to you but made out to the charity so you give it to them, then you would be reducing your reportable income from your required distribution by $2,000, which would be an immediate tax benefit for many Americans. And so that's something that, if you're a charitable giver anyway, I strongly encourage those of you over age 70 and a half especially and this is not everyone, but age 70 and a half is no longer the required minimum distribution age. It's older than that now, between 73 and 75, if you haven't turned your arm DEH yet, I would encourage you to consider whether the qualified distribution may be more tax beneficial than other strategies that you've utilized in the past, and so, again, this is a complex topic. You probably need to think about it for more than two minutes that I'm spending in this episode talking about it, but I do think it's something that's worth mentioning. And, of course, who doesn't want to be philanthropic and charitable in the holiday season?

Speaker 2: 15:10

Well, speaking of generosity, oftentimes people want to make gifts to family members, and I would instruct if you're thinking about that. Of course, there's a wonderful and powerful legacy if you're making financial gifts, but there are also some rules that come with that. The rules aren't that punitive, I think. A lot of times people think if they give too much money, that they're going to automatically get a tax assessed to them, and that's not necessarily the case. The rule is that if you give more than a certain amount in 2024, it's $17,000, that you would be required to report or keep track of those gifts, because it comes into that estate tax conversation that I was just mentioning. It eats into your exemption, which is very, very high nowadays. So you're not going to get a big tax bill, but you do need to be aware of the amount that you're supposed to give, and so it's $17,000. Now if you're married and you were giving to a child, then each spouse could give $17,000. So it could be $34,000. And let's say your kid is an adult who's married. Well, you could make gifts to both people in the couple and that could double it again to $68,000. So there's a lot of flexibility there, because it's per person that you're giving to.

Speaker 2: 16:25

But here's a couple considerations that I would also kind of add to the mix. Let's say that you are in a high tax bracket, that perhaps you pay taxes for your capital gains in the 15 or 20 percent range and you also are perhaps subject to the net investment income tax, which would make that capital gain rate higher. Well, it turns out that if you give appreciated stock and you have the person who is receiving that is in a much lower tax bracket, then they may not have to pay capital gains rates and if they did, they might be lower. There is a segment of income that would not be subject to capital gains rates. This is perfect for people that are early in their career, students that are adults, things like that. So do consider whether you want to give stock that is made money, especially if you were going to sell that stock otherwise and write a check to your kids where you would have a tax bill and they may not.

Speaker 2: 17:21

Another thing to consider what if you have young adult kids perhaps they're over the age of majority or they may actually be teenagers in your house and they have earned income? Well, you can make a gift to match their earned income amounts, to give them, for example, a Roth contribution or something like that Roth contribution or something like that. So I think family giving can be really powerful. You may consider gifts and then shy away from it because you think it would be too complex. Or, like I said, a lot of people think they may owe taxes and so just have that conversation about hey, I'm thinking about a gift like this or that, what comes to mind for you? Because I think it can be very powerful to get creative when it comes to charitable giving and you can have strategies that might be powerful over time as well. There's so much you can think about about what to do at the end of the year.

Speaker 2: 18:14

I hope you set aside some time for reflection, some time to give yourself encouragement for the things that you've accomplished, especially as a listener to this podcast. Hopefully, you have a few things that you've done financially with your money that feel right, feel powerful, feel better than you've done in the past, and so I encourage you to give yourself the attagirl or attaboy that you deserve and reflect with a positive light. And then also, it is a great time and we're really coming up to that traditional time of resolutions to set intentions for the new year. We're going to devote a whole episode about how to tackle 2025 when it comes to your money, and you know, of course, in the first quarter, we're really going to be thinking all about a lot of those things to plan for. But I would just mention now that if you can set aside time on your calendar knowing that time is one of our most valuable resources and one of the greatest sources of wealth that we have in our culture and it's so scarce nowadays set aside some time for yourself to set up that plan for 2025.

Speaker 2: 19:21

It may be during a holiday break when you're off work into the new year, or it may be something that you schedule during your weekends in January and February, when things calm down, but if you can set your intentions and set aside an investment in yourself in a time that is not so frantic. I think that's the wonderful way to kind of if you're sitting here kicking yourself because you didn't put money enough money into things, or you've been thinking about charity but you're just not ready to get started because you're not sure who to give to, or if you want to be gifting to the family but you're not sure if you can afford it, setting aside the time and saying I would have loved to get to this this year, but next year is going to be the time. And not only am I going to hope that I make the time, I'm going to intend and plan to make the time. It can be a very powerful gift and plan for yourself to have that continual improvement. The better decisions over time that really come for that are necessary, but also quite possible for people who really want to take their money seriously. And finally, I would encourage you to consider your money not to be an end in and of itself, but let it be a tool that you use as a resource to improve your quality of life.

Speaker 2: 20:35

And so, as you're setting your intentions for 2025, really reflecting on the things that would be most valuable to you that may not have the biggest price tag, but would really make a difference in terms of your well-being and the way that you feel well, making an investment in those and setting aside time to make those possible can be a really extraordinary gift to yourself. As we're wrapping up the year, I know we have a few episodes left, but I just want to mention how much I appreciate your listenership. I'd love to hear from you for topics that you'd like to hear about into 2025, and give yourself some encouragement as you're reflecting upon everything you got right this year, and if you need to do a couple last minute items, get them done now. Don't wait until the last minute. Give yourself a few days break by getting off this phone and getting that to-do list in order. Have a great week.

Speaker 1: 21:41

Thank you for listening to the Women's Money Wisdom Podcast. If you found value in this episode, the best way you can support the podcast is to forward an episode to a friend or leave a review. Go to pearlplancom and the podcast link to get all the resources and links mentioned.