What should individuals know about retirement contributions, estate planning and other year-end tax moves? 

GHJ’s Tax Practice has developed a comprehensive 2024 Year-End Tax Guide to help businesses and individuals navigate key tax considerations before closing out the year. Each installment in this series addresses critical topics that will help taxpayers plan proactively.

Learn about critical year-end planning moves for individuals — including maximizing retirement contributions, navigating estate and gift tax exemptions and tailoring strategies for seniors and wage earners. With proactive planning, taxpayers can set themselves up for financial success while staying ahead of evolving tax policies.

 

HEALTH AND RETIREMENT CONTRIBUTIONS

Maximizing contributions to tax-advantaged accounts like HSAs and IRAs before their deadlines can significantly impact your financial planning.

Individuals with a Health Savings Account (HSA) should maximize their contributions to this plan before April 15, 2025, for the 2024 tax year. The maximum contribution for 2024 is $4,150 for single people, $8,300 for families. People between 55 and 65 years old can make catch-up contributions of $1,000 (until enrolled in Medicare).

Additionally, taxpayers should consider making an IRA or Roth IRA contribution for 2024 before April 15, 2025. The individual limit for 2024 is $7,000, with an additional $1,000 catch-up contribution for individuals aged 50. Please consult a tax professional to learn more about income limitations.

Converting traditional IRAs into Roth accounts can be a strategic move, especially for those expecting to be in the same or higher tax bracket during retirement. Although a conversion will incur taxes now, it can help avoid potentially higher future tax rates on earnings. Younger taxpayers who anticipate increasing future earnings may benefit significantly from converting sooner rather than later.

Some employers allow after-tax contributions to 401(k) plans, which can be rolled directly into a Roth IRA upon leaving the company. This "super-funding" strategy allows individuals to maximize retirement savings while simplifying tax compliance.

A 529 plan can also be “super-funded” if it has not been done in previous years. Taxpayers can contribute up to $90,000 per beneficiary (or $180,000 for a married couple) to a 529 plan in 2024 without it counting against their lifetime gift tax exemption — which is five years’ worth of gifting (under the annual gift exclusion) for that beneficiary in one year. Any additional gifting to the beneficiary’s 529 plan or any other gifts to this beneficiary over the five-year period will count towards the taxpayer’s lifetime gift tax exemption. If you have already maxed out on the annual exclusion for a particular family member or individual but wish to contribute more towards their education, any direct payments made to the school, college or university for tuition does not count towards the annual gifting exclusion or lifetime gift tax exemption.

 

YEAR-END ESTATE AND GIFT TAX PLANNING 

Year-end estate and gift tax planning is critical for preserving wealth and minimizing tax exposure. The unified federal estate and gift tax exemption for 2024 is a historically monumental $13.61 million, or effectively $27.22 million for married couples, which offers significant opportunities for tax-efficient transfers. These exemptions are scheduled to sunset at the end of 2025, but the new administration has stated its plans to extend and/or make them permanent. GHJ will monitor updates and provide guidance as needed.

As part of this process, taxpayers should revisit their living trust to make sure it is updated. Those who have not set up a living trust should work with an estate attorney to create a plan and discuss what assets to include and exclude. A living trust allows ease of transfers of assets to heirs without going through costly probate (which can take years to resolve). GHJ can assist individuals in coordinating with estate attorneys to ensure estate plans align with their financial goals. 

Additional considerations when planning gifts:

  • Donate Appreciated Stock: Consider donating stock or mutual fund shares held for more than a year to avoid paying tax on appreciation while deducting the full value of the donation. This approach works especially well with no-load mutual funds to minimize transaction fees. Using a Donor Advised Fund (DAF) can further simplify and expedite the process.
  • Offset Losses with Charitable Contributions: Sell stock that is worth less than when it was acquired and donate the cash to charity. If an individual gives the stock to the charity, their charitable deduction will equal the stock’s current depressed value and no capital loss will be available. Be cautious of wash sale rules. If the same securities are repurchased within 30 days, the loss will be added to the basis in the new shares.
  • Ensure Proper Documentation: Charitable contributions are only deductible with adequate records. For cash donations under $250, a bank record (e.g., canceled check or receipt) suffices. For donations over $250, obtain a charity-provided statement detailing the donation and significant goods/services received in return for the donation. If no gift/service applies, that should be confirmed.

 

YEAR-END MOVES FOR SENIOR INDIVIDUALS

  • Delay Taking Required Minimum Distributions (RMDs): Beginning in 2023, the SECURE 2.0 Act raised the age that one must begin taking RMDs to age 73. If a taxpayer reaches age 72 in 2023, the required beginning date for your first RMD for 2024 is April 1, 2025. 
  • Make Charitable Donations from Your IRA: IRA owners and beneficiaries who have reached 70.5 years old are permitted to make cash donations totaling up to $105,000 per individual IRA owner per year — $210,000 per year maximum on a joint return if both spouses make qualified charitable distributions (QCDs) of $105,000 — to IRS-approved public charities directly out of their IRAs. There is no itemized charitable write-off on Form 1040, but the tax-free treatment of QCDs equates to an immediate 100-percent federal income tax deduction without having to worry about restrictions that can delay itemized charitable write-offs. It also reduces your adjusted gross income (AGI). Be careful: To qualify for this special tax break, funds must be transferred directly from an individual’s IRA to the charity.

 

TAX PLANNING STRATEGIES FOR SELF-EMPLOYED INDIVIDUALS

  • Take Advantage of the Business Use of HomeDeduction: This is available to self-employed taxpayers, partners or LLC members who use their personal residence exclusively and regularly in connection with their trade or business. Unfortunately, this does not include employees (W-2) who work from home. Consult a tax professional to learn more about the record-keeping requirements to claim this tax deduction.
  • Make a SEP IRA Contribution: Self-employed taxpayers with considerable self-employment income may be able to lower AGI and taxable income while also socking away money for retirement. This IRA contribution does not need to be made until the due date of a personal tax return including extensions (Oct. 15, 2025, at the latest) to count toward 2024. 

 

PLANNING MOVES FOR WAGE EARNERS 

  • Maximize Contributions to 401(k) Plans: Employees should maximize the amount they contribute to their 401(k) plan at work, especially if the employer matches their contributions. Employee contributions to their 401(k) are tax-deferred and not taxed until the employee begins taking distributions. 
  • Adjust Your Federal Income Tax Withholding: Most bonuses and stock grants have only 22-percent federal withholdings taken out of paychecks this year, even though an individual may be in a much higher federal tax bracket; this can result in a large federal tax owing. If a person expects to owe income taxes for 2024 because of under-withholding, they should consider bumping up the federal income taxes withheld from their paychecks through the end of the year. Make sure the total tax payments (estimated payments plus withholdings) equal the lesser of 90 percent of an individual’s 2024 tax liability or 100 percent of their 2023 tax liability to minimize penalties (110 percent for certain high-income taxpayers). Alternatively, GHJ can help determine any fourth-quarter estimates to pay by Jan. 15, 2025, to minimize any penalties for underpayment, as well as help budget for taxes due come April 15.

 

ADDITIONAL CONSIDERATIONS

Homeowners may exclude up to $500,000 ($250,000 for singles) in capital gains from the sale of a primary residence. To qualify, the property must have been owned and used as the taxpayer’s primary residence for at least two of the five years preceding the sale.

Proactive year-end tax planning allows individuals to take control of their financial future, reduce liabilities and align strategies with long-term goals. Contact GHJ’s Tax Practice for personalized guidance to ensure you are making the most of these opportunities.