December Client Letter: 8 Year-End Planning Tips That Put You in the Financial Driver’s Seat
The holidays are here, and while the year-end hustle can be overwhelming, it’s also the perfect time to set yourself up for success in 2025. Here’s an easy-to-follow checklist to help you lower your taxes, make the most of your investments, and give back.
An 8-step year-end checklist
- Turn Losses into Wins
Not every investment is a winner—tax-loss harvesting can help. Sell investments at a loss and use that loss to offset gains or reduce your taxable income. Just don’t forget the “wash sale rule” to avoid complications!
The loss can be used to offset a gain in a taxable account or reduce your income by up to $3,000. If greater than $3,000, losses can be carried forward in future years to offset ordinary income or capital gains.
It’s important, however, to be aware of a couple of things.
First, a stock or security held for one year or less is taxed as ordinary income, i.e. your marginal tax rate. The tax on a long-term capital gain (held longer than one year) receives favorable tax treatment and is taxed at the long-term capital gains rate, from 0% to 23.8% (including the 3.8% net investment income tax).
Segregate long-term and short-term gains/losses separately and apply the appropriate tax rate. If you have taken or will take gains this year, you may consider netting gains out with securities being held at a loss.
Second, be aware of the wash sale rule. If you sell a security at a loss and buy the same or a “substantially identical” security within 30 calendar days before or after the sale, you won't be able to take a loss for that security on your current-year tax return.
- Cash In on Gains the Smart Way
If your income falls within the 0% capital gains tax bracket, selling and repurchasing appreciated assets can increase your cost basis without a tax bill. Watch out for state taxes or potential Medicare premium hikes, though
In 2024, single filers with a taxable income of $47,025 or less, joint filers with a taxable income of $94,050 or less, and heads of households with a taxable income of $63,000 or less pay no federal tax on qualified long-term capital gains, i.e., a rate of 0%.
In this case, taxable income is defined as the income subject to federal income tax. It is income after all deductions, whether itemized or taken via the standard deduction.
Here lies a lesser-known but profitable strategy. If you choose to realize a long-term capital gain for an asset that has appreciated, you sell the asset that you have held for more than a year, record the gain, and immediately repurchase it without incurring federal income taxes.
By entering such a transaction, you raise the cost basis of that investment without paying federal income taxes.
Just be careful. A higher adjusted gross income could be subject to state taxes and may raise your premium if you obtain health insurance through the marketplace.
Combining this strategy with a Roth conversion could also push you into a higher tax bracket, defeating any strategy to harvest capital gains without paying taxes.
- Don’t miss your RMD
What is an RMD? An RMD is the minimum required distribution you must withdraw from select retirement accounts (such as traditional IRAs) each year. There is no such requirement for a Roth IRA. Miss an RMD and you’ll be penalized by the IRS.
When are withdrawals required? If you were born between 1951 and 1959, you must take your RMD starting at age 73. If you were born after 1959, your first RMD begins at age 75.
Why the discrepancy? Congress enacted changes to our retirement laws in 2019 (The Secure Act) and again in 2022 (Secure 2.0). If you have already begun your RMD, you must continue, even if you are under the prescribed ages.
Please be aware that the delay may push you into a higher tax bracket or trigger the additional Income-Related Monthly Adjustment Amount (IRMAA), which is a surcharge you pay on top of your Medicare Part B and Part D premiums if you exceed the annual income threshold.
The surcharge on Medicare Part B and Medicare Part D applies only to Medicare beneficiaries with a modified adjusted gross income above $103,000 ($106,000 in 2025) for an individual return or $206,000 ($212,000 in 2025) for a joint return.
If you are enrolled in your current employer's qualified retirement plan and don’t own more than 5% of the business, you may be able to postpone an RMD from that account until April 1 of the year following your retirement. Be sure to check with your plan administrator to confirm.
- Lower your RMD with a QCD
Love donating to charity? If you’re over 70½, a Qualified Charitable Distribution lets you donate up to $105,000 directly from your IRA without paying taxes on the withdrawal.
A QCD is a Qualified Charitable Distribution that allows you to support your favorite qualified charity while helping you to reduce taxes from an RMD.
If you are 70½ or older, you can make a tax-free donation directly to a qualified charity from your traditional IRA, which allows you to fulfill your RMD by a direct transfer of up to $105,000 to charity.
In the past, a QCD was limited to $100,000 per year. Under Secure 2.0, the amount is now indexed to inflation, with a limit of $105,000 in 2024.
- Does a Roth conversion make sense?
Roth conversions can be a game-changer. While you’ll pay taxes now, your future withdrawals will be tax-free. The catch? It’s only worth it if your future tax rate is higher than today’s.
You are allowed to convert a traditional IRA into a Roth IRA. A Roth conversion will raise your taxes this year. However, once in a Roth IRA, qualified withdrawals will not be subject to federal income taxes.
Should I convert?
Broadly speaking, what will the tax rate be on the conversion, and what will your tax rate be when you withdraw?
For example, if the tax rate on the conversion is 25%, while the expected tax rate on withdrawals is higher, it may be best to bite the tax bullet today and convert. If the withdrawal rate is lower, a Roth conversion could disadvantage you.
It is best to pay taxes on the conversion from money outside your IRA to maximize the conversion and future growth potential.
The process may create complexities, but we’re available to help you evaluate your options.
- An HSA triple play
An HSA is like a superpowered savings account for healthcare. Contributions, growth, and withdrawals for medical expenses are all tax-free. Don’t leave money on the table!
These accounts offer you a triple advantage: no federal taxes on your contributions, no federal taxes on earnings, and no taxes on withdrawals if the money is used for qualified medical expenses.
After age 65, withdrawals can be used for any expense but may be subject to income tax.
In 2024, you may contribute up to $4,150 if you are covered by a high-deductible health plan for yourself or $8,300 if you have coverage for your family. At age 55, individuals can contribute an additional $1,000.
- Save for Education with a 529 Plan
Contributions are made with after-tax dollars, but growth and withdrawals are tax-free so long as withdrawals are used to pay for qualified education expenses.
- Donate assets that have appreciated
Selling an asset and donating the proceeds to a qualified charity can trigger capital gains taxes.
Instead, if you itemize deductions and donate an asset held longer than one year to a qualified charity, you may be able to deduct the fair market value of the asset without paying capital gains on the sale, subject to a 30% adjusted gross income limitation.
Final thoughts
We trust that these planning ideas have been helpful. If you have questions, please don't hesitate to contact us. If you have specific tax questions, you may also want to check in with your tax advisor.
A November to Remember: The Market’s Big Win
November was like a winning streak for the stock market. The Dow and S&P 500 soared, hitting new highs and leaving investors thrilled. But what fueled this rally? Let’s dive into the story.
The Calm After the Election Storm
The election wasn’t contested, and for markets, that was a sigh of relief. No drama, no uncertainty—just the clarity investors crave. Add to that Donald Trump’s reputation as a business-friendly leader, and you’ve got the perfect recipe for a market rally.
In our space together, our goal is simply to review the result through the very narrow prism of the market, i.e., the collective view of investors.
Last month, the Dow and the S&P 500 Index recorded their best gains of the year. The Dow and S&P 500 ended the month at a new high, while the small-cap Russell 2000 Index eclipsed its prior November 2021 high late last month.
Key Index Returns | ||
Index | MTD % | YTD % |
Dow Jones Industrial Average | 7.5 | 19.2 |
NASDAQ Composite | 6.2 | 28.0 |
S&P 500 Index | 5.7 | 26.5 |
Russell 2000 Index | 10.8 | 20.1 |
MSCI World ex-U.S.A.** | 0.1 | 5.0 |
MSCI Emerging Markets** | -3.7 | 5.4 |
Bloomberg U.S. Agg Total Return | 1.1 | 2.9 |
Source: MSCI.com, Bloomberg, MarketWatch
MTD returns: October 31, 2024–November 29, 2024
YTD returns: December 29, 2023–November 29, 2024
**in US dollars
Trump’s Game Plan
Investors are betting on deregulation, extending the 2017 Tax Cuts and Jobs Act (set to expire in 2025), and exciting proposals like eliminating taxes on tips and overtime pay. There’s even talk of slashing the corporate tax rate for U.S.-produced goods to 15%.
But here’s the twist: Passing these measures through a divided Congress won’t be easy. Compromises will likely shape the final outcome. For now, the market is optimistic, and that’s fueling the fire.
A Lesson from Warren Buffett
Why do corporate tax rates matter so much? Here’s a simple breakdown:
Before 2018, a 35% corporate tax rate meant 65 cents of every profit dollar went to investors. Now, with a 21% rate, investors keep 79 cents. That extra earnings boost? It’s a major reason stock prices climb.
The Tariff Tension
Not everyone’s thrilled about Trump’s economic plans. Proposed tariffs could raise costs for consumers and invite retaliation from other countries. For now, the market is focusing on the positives, but tariffs loom as a potential wildcard.
Looking Ahead
Stocks are flying high, but they’re priced for perfection. Any surprise—good or bad—could shake things up. For now, staying diversified and focused on the long term is your best play.
We’re here to help you make sense of it all. Let’s work together to navigate what’s next. Your trust means everything to us, and we’re honored to guide your financial journey.
Kind Regards,
Niles P. Geary, II, MBA, CRPC, AIF™
Co-Founder & CEO
Niles P. Geary, II is Registered Representative offering Securities and Advisory Services through UNITED PLANNERS FINANCIAL SERVICES, A Limited Partnership Member: FINRA, SIPC Voyage Partners Financial Strategies, LLC and United Planners are not affiliated.
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