A Wiser Retirement®

254. Closing the Year Strong: Key Financial Moves Before Year-End

• Wiser Wealth Management • Episode 254

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Discover how to make your investments work smarter, not harder, with tax-efficient strategies. In this episode of A Wiser Retirement® Podcast, we tackle the big questions, like whether Roth conversions make sense for you, especially if you're in a low tax bracket now but anticipate higher income later. We also explore the potential of direct indexing for larger accounts and the often-overlooked benefits of FSAs and HSAs. This episode is packed with practical advice and insights to help you navigate which financial moves you should make before year-end.

Related Podcast Episodes:
- Ep 196: Your Year-End Financial Planning Checklist
- Ep 190: Year-End Tax Moves: Planning Ahead for a Stress-Free Tax Season

Related YouTube Videos:
- Reduce Your Taxes and AGI by Giving to Charity
- What is the best way to take your RMD?

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- Schedule a Complimentary Consultation: Discover how we can help you achieve financial freedom.
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This podcast was produced by Wiser Wealth Management. Thanks for listening!

Tax Planning Tips for Retirement

Speaker 1

So, yes, you might be in a low tax bracket, but is it temporary? So if you're in the 12% tax bracket and you're going to be in the 12% tax bracket for the rest of your life, why would you do a Roth conversion now?

Speaker 2

Right.

Speaker 1

Right, right. I mean I can give you a couple of reasons why, but if the sole purpose is to pay the least amount of tax in your lifetime, you're just prepaying tax for down the road. Your tax bracket is not going to be increased. Those are not the people that they're targeting for tax increases right Now, if you're in the 12% tax bracket, but when your RMDs kick in from?

Speaker 3

your IRA in a few years, then maybe you're at 22%.

Speaker 1

then Well, yeah, you should be converting it at 12. Welcome to the Wiser Retirement Podcast, where we believe the best financial advice should always be conflict-free. I'm your host, casey Smith, guiding you to financial freedom. Today is my co-host, shana Theriault Morning. Hey, shana.

Speaker 2

How are you?

Speaker 1

Doing good you.

Speaker 2

Great.

Speaker 1

Shana has been on quite a few episodes with us. You know her as the hardest-working, smartest financial planner in the world. Thank you I haven't settled completely on your nickname yet. I have a few in my head, but we'll have to announce those later. Maybe that'd be a New Year thing. Oh good.

Speaker 2

Do I get to approve it first? Absolutely not.

Speaker 1

That's how all nicknames work. The problem with nicknames is, a lot of times people have a quirk or they do something silly and that's how you get your nickname, and that's not what we want to do here at all.

Speaker 2

No, we don't want to do something silly. No, it's serious.

Speaker 1

So all those attributes are very true and you're doing a great job here. I feel like you've been here for years and decades. Thank, you. But we're still inside the one-year mark.

Speaker 2

We are Actually, we're still inside the six-month mark. Isn't that funny. It is funny. It doesn't feel like that for sure.

Speaker 1

We definitely have the world's best team. There's no doubt about that. I'm so grateful for you guys being here carrying out the Wiser mission.

Speaker 2

Well, we feel that and so we appreciate that very much.

Speaker 1

All right. Well, we can hug later, all right. So it's November 18th is the post date for this podcast. It's episode 254, which is crazy. We started this thing a long time ago and, man, what a fun ride it's been. We've interviewed some great people. You can also see this on A Wiser Retirement on YouTube. Just go to youtubecom and you can type in A Wiser Retirement and you can see us. We have these beautiful camera angles that Rachel has put together and we have Hadley staring at us at a distance, directing us, making sure we're staying on track and I'm not. So we will, yeah, and we have bonus features too. So you can see other videos that we've done on various topics. Shauna, you just did one on tax.

Speaker 2

I did. I did a video on tax. That's blowing up the universe right now on YouTube, yes, there's a lot of views just calculating tax and retirement, so that's a huge question we get, though that's true. How do I know? I don't. I'm not paying in my paycheck.

Speaker 1

And what most financial advisors say is consult your tax advisor, which always made me angry.

Speaker 2

Well, they're so. They don't have time to talk to you, they're so busy.

Speaker 1

Well, yeah, oh, the tax people, tax advisors, yes.

Speaker 2

Yes, they don't have time to talk.

Speaker 1

CPAs in the tax prep sense. Um, I feel like a lot of firms have just they want to do the return and they kind of move on. There's not enough planning going on.

Speaker 2

Yeah, I don't think they have the staffing for it. I don't think it's their fault. There's, you know, if you want to find a job, any any new graduates, be a CPA, because they're definitely in demand in the industry.

Speaker 1

No, very, very true, and so what we've done here is just downloaded the right tax software to go figure out how to do this Right, which we've been doing it for years, but just making it more of a regular review of our clients when they come in that we do tax planning while they're here.

Speaker 2

Right.

Speaker 1

That's really important. Someone's got to be doing it, and I think that's the role of a's, the role of a, of a financial advisor. Anyways, play a bit of a quarterback with other professionals.

Speaker 2

Completely and not step on toes but help and give feedback and have them validate it. But you know, I started doing tax projections I don't 20, almost 20 years ago just to help clients get. That's one of the reasons I got the CPA, like I know you and I talked about that just so I would understand the tax ramifications of all of it, cause it's such a huge piece of a client's financial portfolio.

Speaker 1

Absolutely so. A lot of people complain about their tax bill after the fact, after the year's end, cause it's now February, march, april. Uh, reality is you can't do much about it. Then you need to uh legally anyway. Uh, so you need to be focused on tax planning now, before December 31st. So the planning starts before, typically, september. October is when we start doing it. We're doing this podcast mid-November. People are thinking more about Thanksgiving right now than they are about, probably, tax planning.

Speaker 1

But, this is your last-ditch effort to take a look at what's going to be happening for the year and you can make some changes, potentially by year end. So I would say that number one is probably Roth conversions. I think that's something that a lot of people overlook or don't understand. Aarp and Susie Orman and all these other people you got to remember are writing articles to the masses, so it doesn't necessarily apply to you. So, yes, you might be in a low tax bracket, but is it temporary?

Speaker 1

So if you're in the 12% tax bracket and you're going to be in the 12% tax bracket for the rest of your life, why would you do a Roth conversion now? Right, right, I mean, I can give you a couple of. But if you're, if the sole purpose is to pay the least amount of tax in your lifetime, you're just pre-paying tax for down the road, your tax bracket is not going to be increased. Yeah, those are not the people that they're targeting for tax increases, right? Uh, now, if you're in the 12 tax bracket, but when your rmds kick in from your ira in a few years, then you maybe you're at 22%, then Well, yeah, you should be converting it at 12.

Speaker 1

I might consider converting to 22, but I'll probably wouldn't do that till next year, until we understand what's going to happen with taxes. Unfortunately, we have the disadvantage that we're recording this before election day, so I can't tell you exactly what's going to happen politically, because we don't know. I see some really desperate reaching by one side right now and some of the news headlines, so I have a feeling it's going to go tax favorable politicians, but if it doesn't, then we have 12 months to go figure that out.

Speaker 2

Uh, on on on how that's going to affect people and we've started looking at Roth conversions for clients now. But it's the whole point. It's really important. It feels like when we're looking at tax reviews, you know, for our flat fee planning, I see a lot of penalties out there too. So there should be no if. If you're planning and looking at it beforehand, there should be no surprises in April. Correct, really there shouldn't be.

Speaker 4

Right.

Speaker 2

So, whether you go to your CPA, your advisor, if they do that for you and there's even, you know, if you have a simple return, there's calculators online that can help you with that. Yes, so hopefully there's no surprises, because that's just you know, because you've done proper tax planning. Exactly, absolutely, because you've done proper tax planning.

Speaker 1

Exactly, Absolutely, and I think, as an advisor standpoint, what we're looking for is opportunities to be contributing to Roths directly backdoor Roths if you make too much money, Roth conversions to save on future tax. That's primarily what we're focused on. If you're a business owner, we're not sitting here doing your tax return for you to understand how things are going to play out. That's where you you do need your CPA to be engaged with you. Yeah, Because there's going to be. We're not experts on R and D credits and how how all these other things work.

Speaker 2

Right, and there's other things in there, like potentially depreciation. There's so many other factors that are saved in the program, if you will, that calculates and does the output and then even looking at retirement contributions for self-employed, you know it's really looking at up to 25% of the income, depending on what type of plan it is. Um, doing the deferrals as an employee is is always good, but you know those other things need to be looked at with your account.

Speaker 1

That's a good, um good point, actually, if you're a business owner and you work by yourself. So you're an independent contractor, sole proprietor or you run an LLC but you're the only employee, or your only employee or partner is your spouse. You can do a solo 401k and potentially you could put away $72,000-ish in that ballpark $69,000 if you're under 50, if you're over 50, then you get a catch up, Right, Exactly, Um so, but you have to have.

Speaker 1

You have to have things set up to do that. You can't just write a check for that. It's, it's, it's. You know, there's a, the base you can put profit sharing, which is technically how that's done. So it's a percentage of your income.

Speaker 2

So you have the employee contribution, the deferral and then the employer.

Speaker 1

Even though it's all the same, because you're just a solo person. So those are things that you need to be thinking about now, but, at the same time, those are also things like the profit sharing. That's one of the few things you can do in the new year for the prior year. You could have new revenue in 2025 and say, hey, I'm just going to do profit sharing for last year to lower my last year's tax liability and you can move that expense to the year prior. That's one of the few things you can do after December 31st and the deadline is still pretty early because you've got to file your tax return by March 15th anyway, so you need to be doing profit sharing well before that. So, anyway, let's let's talk about some other things that you should be thinking about as we as we approach the year end. I think the simplest one is have you maxed out your 401k IRA contributions Right?

Speaker 2

And also in looking at your 401k, I really feel like you know, I know we look at, we have this question a lot Should we do pre-tax or should we do Roth in your 401k? And most plans offer that. Now I mean, I think that's pretty standard and I would look at where your tax bracket is going to be really, because we have this moment of time where in 25, we don't know what's happening yet, as you mentioned, but after 25, the tax brackets are going to adjust again. And so you know there's that tax bracket in the window where you know if you're married, filing jointly, that $383,000 is a 22% tax bracket, that tax bracket is going to jump next year. And so you know, maybe if you're in the 22 tax bracket as a family, not individually maybe you look at doing a Roth and so you may want to change those elections now for next year and consider doing a Roth. There's other things to consider, like credits et cetera, but generally you know, even the child tax credit, you know if you're below that 400 threshold, the 383 threshold and that 22% tax bracket, especially since even before deductions because it's a little bit higher if you have deductions the standard even deduction maybe even consider doing a Roth and switching that over, just depending on.

Speaker 2

Sometimes that's hard because you don't know what your income is going to be. But just think, be forward thinking, to to what are you? What is it going to look like next year for my income? And again, sometimes you can't plan for that. I've seen so many clients recently have our issues restricted stock units where they're getting you know it's a type of deferred compensation where they get their salary and then they have our issues that are put into an account. That usually vest over certain days and there's nothing you can do about those. They just vest automatically at ordinary income. It's part of your compensation. So you have to take all of that into consideration. But you know, just trying to pre-plan, you know for this year maxing out, but then consider where should I be contributing next year? So you can position yourself. You can always change it mid-year as well, but just think about forward thinking to next year. You know where should I be contributing to.

Speaker 1

I think that's really important. Yeah, absolutely.

Speaker 1

Um other thing would be tax loss harvesting is something that uh, diyers, so people who are just managing investments themselves very rarely pay attention to. Um, they're focused on usually just performance and how well a stock is done. Focused on usually just performance and how well a stock is done Uh, they don't tell you about or don't want to address the losses in the portfolio. And you could have losses in the portfolio. That should be tax loss harvested, meaning that you can write off $3,000 a year on your schedule D. Uh, and that comes off your income. Yes, that's not a percentage, right, it comes right off your, right off your income. So it's been a good couple of years in the market.

Speaker 1

People have less gains now or, I'm sorry, less losses which you think is a good thing, but when you look at your return, it's your total return, which means that what is the total cost of investing and that's one way to get some of that cost back is by having the capital gain write off. And if you have capital loss, carry forwards, meaning if you have something you go. This stock's never going to rebound, I'm just going to walk away from it. You sell it. Let's say you got a $10,000 loss. You can write off three, but the remaining seven can carry forward to the next year, right. And if you sold something the next year for a $7,000 gain, then you wouldn't have to pay any tax, right. And also, it can be used in other ways as well. You could have a position that's done really well and you need to pair that position. But you're going to have capital gains tax, the CS bracket's what? 15, 20? 15 and 20. And then, if you're above 400,000, you're gonna pay the 20%, plus the uh, obama healthcare tax, Medicare tax right, Exactly.

Speaker 1

Uh, on top of that, which is what? 3.8% if I remember correctly, so 20, 23.8% is the highest you could pay in in a total capital gains tax. Uh, but you can also use it as an opportunity to um change some things out. So you think about mutual funds. If you still have mutual funds like who has mutual funds anymore? Right? So look at, look at removing those mutual funds if they're in brokerage accounts, because they're going to send you a capital gains tax bill.

Speaker 1

So if there's opportunities to shift those into more ETF focus which have a unique creation redemption process to protect you from taxes, now is the time to be to be looking at that. Also to, if you're going to think about the longterm and brokerage accounts, if you've got more than I'd say, more than a half million dollars total in a brokerage account, you probably should be looking at direct indexing. So direct indexing creates these tax credits for you as you go forward. You'll get the same rate of return as the ETF, but it's just more a tax efficient way to do things, and I think that's the value of us as advisors is understanding the complete picture.

Speaker 2

Right.

Speaker 1

Where most 90% of our financial advisors would say, hey, look at all this money I made you. Well, it doesn't matter if you're going to hand it right back over to Uncle Sam. Yeah, so you have to do things tax efficiently. One thing I never think about this, but for people who work at really big corporations, they have the flexible spending accounts and you have to spend that money by when.

Speaker 2

You have to spend that by the end of March and the following year but the costs have to be incurred, I believe, by December 31st. I believe that's true, but I know you have to do by March 31st. They extended it. They've extended it the last few years where you have three months into the new year to use it, which is different than an HSA Usually FSA, you know you lose the money Exactly Every year, whereas an HSA is for high deductible healthcare plan and you can put money in there and that's another tax deferral you can get for someone who's a W-2 employee. There's not many, you know. Deferral to 401k if you're doing pre-tax and then HSA, you can max that out. A lot of our higher income clients will defer to that and just hold it and use it for future medical expenses and use it as an investment account, a tax deferral or tax-free growth vehicle. So that's a great play.

Speaker 1

Yeah, and typically FSAs. You set your number at the beginning of the year, so the open enrollment should be going on for most companies right now. So setting up your HSA contributions, your FSA contributions or things you want to be thinking about, but yeah, go buy those contacts, go buy those glasses, go get your teeth cleaned, do all the things that to use up those funds so you don't lose them. The max for the HSA is $8,300 for the family, it's $4,150 for an individual HSAs. Typically they allow you to increase your contribution throughout the year, so you're not as locked in on those. I would say look at your HSAs and how much have you building in the account. I think if you're over your deductible, you probably should have that money invested. I think if you're over your deductible, you probably should have that money invested. So Optum is a big one, Fidelity even Schwab, I think has HSA accounts.

Speaker 1

You have the ability to keep those invested. I'd probably just do like a 60-40 allocation, something along those lines, and get those to work. So now's a good time to be reviewing that.

Year-End Tax Planning Strategies

Speaker 3

are you curious why annuities keep coming up as a potential investment option? People are often told that annuities can effectively mitigate investment risks and help secure their financial future. However, annuities often benefit the salesperson and might not be the best choice for you as a consumer. To learn more about the various types of annuities, the negatives of owning them and better investment alternatives, we have a free ebook on our website just for you To download our ebook. Buyer, Beware, why Do they Keep Trying to Sell you that Annuity? Simply click the link in the episode notes or visit wiserinvestorcom slash guides. Now let's get back to the episode.

Speaker 1

Have you maxed out your 401k? That's another, that's another angle. You've got what? Probably two more paychecks now, when this podcast posts.

Speaker 1

So, if you're going to be short, then you need to figure out how to get that maxed out. Especially if you're in the higher tax bracket. You want that to be pre-tax most likely. You need to obviously have a plan so we know exactly what you need to be doing, but for most high wage earners you want to do that pre-tax. I would also something that we had a listener reach out to me via email the last couple of days you think about matching that. Our company has a true up feature. So if you match out, if you max out your 401k by, let's say, July, you still get your match based on your salary through the rest of the year.

Speaker 2

Yeah.

Speaker 1

Right, yeah. Well, most plans don't have that, so if you're.

Speaker 1

If you're going to max out too early, then what that means is you're not going to get your full match from the company. So you do need to pace yourself. If you don't have a true up option in your 401k plan, you need to pace yourself for all the people that I'm gonna get emails from after making that comment. Uh, delta, american, united, southwest all the major airlines have true up, uh built into their, into their platforms that your, your, your unions have negotiated all that. But for people in the normal corporate world, that's not normal to have a true up feature, right? Unless you're working for a larger. You know, if you're at a fortune 500 company, you probably you have a true up feature because their executives want the same true up feature, right? Um? But if you're working at a mid to small business, there's a chance that you don't have that true up feature and you just need to make sure that you're not maxing out before the end of the year.

Speaker 2

Yeah, usually you can go to your plan summary description or summary plan description to see what it says and look at the details to see if you have that true feature or not.

Speaker 1

Correct. We talked about Roth conversions. You made a note here, shauna. Anything below 22 to 24% tax bracket you probably would be converting. Only caveat is if you're never going to be above where you're converting Right, or just to fill up that tax bracket, you probably would be converting. Only caveats if you're never going to be above right where you're converting.

Speaker 2

Right, or just to fill up that tax bracket you know, which would take a tax projection to look at. Is to say, where am I going to fill up that tax bracket?

Speaker 1

Correct.

Speaker 2

Cause you can't just, you know, wing it Um. You don't want to push yourself over.

Speaker 1

So so charitable contributions. Walk me down the my options for charitable contributions. It always seems confusing to me because I feel like if I gave a dollar, I get to deduct a dollar. But that's not how that works I mean sort of it's not.

Speaker 2

It's not a credit, it's a deduction, but um you know, it depends on what tax bracket you're in right, right, exactly.

Speaker 1

So if I gave a dollar. I'm in the 12 tax bracket, I'd be get like 12. 12 cents of that dollar would get off of my return.

Speaker 2

Yes, I mean there is like a front of the line deduction for charity. But generally you know you're looking at itemization and sometimes when you make charitable contributions you don't even get a deduction because you're using the standard deduction.

Speaker 2

So, and that's okay, I mean it's just because you want to still give, you know. But for just generally, you know, looking at what your taxes are projected to be, if you want to be in a certain realm, there's tons of clients that would rather give to charity than pay tax, you know, because they're terribly inclined anyway. So you want to be looking at it now for sure, especially depending on how you're going to be gifting it. If you're giving cash, that's pretty quick to just give cash. But if you another play when you're talking about individuals that have those large brokerage accounts instead of taking capital gains, you can gift appreciated securities, which would be transferring the security directly from your brokerage account to the charity. So that is very powerful as well, because you don't you don't want to sell it first and then gift it. You actually gift it directly and you don't have to pay the tax on that, and neither does the charity. Because they're a charity, they don't pay taxes. So you still get the tax deduction for that and you avoid the capital game.

Speaker 2

If you're looking at your taxes at year end and you're thinking, okay, you know, I just want to give to charity, but I don't know where I want to give it to, you can always do a donor advised fund as well. Many brokerage firms have it. Charles Schwab has it Schwab advisor fund. So it's you know, a fund that you can set up to where you control it. You invest it, but you can move the securities or cash there now invested. But you can move the securities or cash there now, get the tax deduction now and then decide where it gets donated later and it's also gets invested as well. So that's you know one way to quickly move things to. You know, simply move it to get the tax deduction, then decide what charity it goes to later.

Speaker 2

So I like that play as well. So I know we're going to get to required minimum distributions and you mentioned it briefly. But you can also, if you are RMD age required minimum distribution age you can give up to a hundred thousand of your distribution directly to charity. So that's another thing to look at too. Before year end we do have a deadline of 1231 for the RMDs, but that's another way to give a charities directly. You don't get the deduction for that, but you do get to avoid the income on your tax return, which is very powerful. So that's another way to give to charity and just avoid income. You still don't get a deduction, but you don't have the income on there as well.

Speaker 1

So speaking of RMDs, um a little confusing. Now used to be at 70 and a half. You take so much of your money.

Speaker 2

I literally have to look at the chart every time, like, wait, what is your date of birth? You know?

Speaker 1

So it doesn't. 70 and a half is not a thing anymore. So you're either going to take it at 73 or you're going to take it at 75. Right, that's Secure Act 2.0.

Speaker 2

Unless you're already taking it and you're before 73, then you still have to keep taking it.

Speaker 1

Yes, that's correct. So then he writes you see, that's where it's still confusing. So if you're a wiser client, we have a list and we make sure you get your RMD out before year end, so you don't have to worry about that. If you're not a wiser client, then, yes, you need to make sure that your advisor or, if you're self-managing, that you know put your birth date in. You can do these calculators online.

Speaker 2

You can go in where's my RMD age and you'll just type in your birth date and it'll tell you Exactly it has a calculator for you and if we have any new listeners it's required minimum distributions that you're forced to take from your retirement accounts at a certain age and pay tax on them. So this is that pre-tax deferral we've been talking about into the 401ks. You know the traditional, if you will, where you get the tax deduction now and you pay taxes later. They force you to take it out at a certain age. Roths and Roth 401ks as of today, the way the tax code's written and I say that because things change all the time you don't have to take a required minimum distribution. So we're speaking about IRAs and sometimes 401ks, depending on the situation there. Generally speaking, if you're still working and you're less than a 5% shareholder or owner of the company, you don't have to take RMDs. So I've had many clients work beyond well into their 70s because they wanted to, not because they had to to and they got to avoid that for now.

Speaker 1

But generally speaking, we're talking about IRAs so if you inherited an account, there will be RMDs as well, and that's been very confusing over the last few years. I think Congress and secure act and the secure act they intended to change the rules to be 10 years after you inherit an IRA or a retirement account, you would, within 10 years, you'd have to take a full distribution, but before you could, you could carry out that tax referral for a very long time.

Speaker 2

Yes.

Speaker 1

Now you, you know. The question is do you have to take an RMD over those 10 years? And the IRS says yes, congress said no, but Congress did not come back and say no officially. So the IRS got the rule and now, yes, you do need to take an RMD, based on the 10-year rule. Except, it's been so confusing that the IRS has given an exception and they've said, hey, if you didn't take one, then you don't have to pay the penalty. Right, there's no penalty for not taking one, right, so that freedom still applies to 2024. So you don't have to take an RMD in 2024 on an inherited IRA, or if you didn't take the RMD, there's no penalty. It's probably the better way to say that for a newer one, yeah, for a newer one, yeah, yes, if your loved one passed away years ago, you're still taking your RMD right so now, if you roll into 2025, that that exception probably would not?

Speaker 2

right right so and they did clarify earlier this. I still think it's clear as mud, but you know they clarified that if the decedent, the person who passed away, had already been taking required minimum distributions, then you have to continue the RMDs annually. And if they hadn't, if they were young, then you can take it anytime in the 10 years. That that's the rule thing that I saw, but it could be different.

Speaker 1

So it's very confusing and CPAs are still struggling with it. Sure the same thing to do would be to take RMD but, I, know that, if you don't, or if you didn't, in the year prior years prior, that, that you're not going to pay a penalty for that Cause. The penalty for not taking your RMD is pretty steep, it's 50%.

Speaker 2

I believe that's what it used to be Exactly so it's like still take it out and penalty on top of that.

Speaker 1

Right.

Speaker 2

And when you take it out, if you're taking it from that account, cause that's your only asset to take it from, then you pay tax on that distribution too.

Speaker 2

Yeah so you pay tax on your tax. That's always been. But this is a good point with the inherited IRAs, because you know that's something, it's something we look at annually and this is a non-spouse we're talking about. You know, if your spouse inherits your IRA, then they can treat it as their own. So this is really we're talking about kids, brothers, whatever, you know, girlfriend, whatever, whoever inherits a retirement account, that's not your spouse.

Speaker 2

And so when looking at that, this is part of tax planning because you have that 10 year period where you have to take it out. So you have the minimum, potentially, that you have to take. But should I take more? Well, it depends. Do you have some RSUs coming due next year and you know your taxes are going to be lower this year, the next, then maybe you bunch it all in this year Plus, you know, depending on what tax bracket you're in and what they do with tax rates, tax rates could be going up after 25, right 2025.

Speaker 2

So maybe you bunch it a couple times, you know. So we don't have a lot of clarity right now. We will have clarity soon. But, you know, just taking that into consideration, you know, looking at potentially taking more because you have to distribute it within 10 years, depending on and sometimes we don't know what our income's going to be. I mean, we don't know if something's going to happen, you know, unplanned of course, but we have to make the decision, you know, based on what we know now and so, just you know, doing it equally over 10 years potentially, but also bunching up and doing more in certain years where you think your income may be lower. So I mean, I think that's important to look at that on an annual basis as well around this time.

Speaker 1

In addition to that, you might want to consider looking at the annual gift tax exclusion. So if you wanted to give money away to a loved one exclusion, so if you wanted to give money away to a loved one, um, you can do so without having to pay any any type of like gift tax, as long as you keep it below $18,000 per person yes, Per person Uh so that means if husband and wife wanted to give to their daughter who's married, the wife could give 18,000 to the daughter, the husband gave $18,000 to the daughter, the husband gave 18,000 to the daughter and then the husband could give 18,000 to her spouse and the wife could give 18,000 to her spouse.

Speaker 2

So you can move quite a bit of money you can and you can give to their children too you correct.

Tax Planning Strategies for Business Owners

Speaker 1

You give to their children, so, uh, make sure you're. If you're trying to remove assets from your estate, that's the simplest way to do it. There's no form to fill out. Um, you just have to remove assets from your estate. That's the simplest way to do it. There's no form to fill out. You just have to keep it below those minimums. Now, if you have a sizable estate in the next year, I'd probably wait until 25,. You want to take a look at your lifetime exclusion?

Speaker 2

Right.

Speaker 1

And that requires an IRS form to be filed with that. But right now for a married couple it's over $22 million.

Speaker 2

Yeah, it's over $22 million. Yeah, it's really high.

Speaker 1

It's really high, but that that number could be cut in half depending on what happens in Congress over the next, over the next 18 months or so. Yeah, so we're all watching that very closely. I'm sure there'll be other podcasts about it when it comes time.

Speaker 2

Another thing to think about too is just prepaying or paying deductible expenses, with the standard deduction being as high as it is. A lot of Americans don't even deduct itemize anymore. It used to be. You'd save up all your receipts and have all of everything that you could deduct and they took away so many of that. But you still can deduct some, the state and local taxes. There's a limit of 10,000. But that's. You know what did you pay to your state or local municipality? So you have those taxes. Any medical expenses they still have the AGI thresholds, but medical expenses.

Speaker 2

So again, making sure you're paying those in those years, in this year, to the extent you can, not any that you're using through FSA or HSA, because that's not, that's double dipping. But you know getting those together. Um, and really you know property taxes is another one. Usually property taxes is due around this time anyway. Um, you know there used to be that play where you could pay it next year, this year, etc. And kind of. You know, if you don't, um, depending on when the taxes are due, you could push it to the next year potentially, but going ahead and paying it in this year. So you get the deduction and then mortgage interest. Typically that's just throughout the year, so there used to be other things that we could deduct. Charitable is another one looking at the charity deduction. So you know, just going ahead and looking to see where are your deductions this year comparatively to the standard and then making sure that you pay into them so that way you can get the deduction and keep records of that.

Speaker 1

You can also for business owners um, look at paying your state taxes through your S corp. Uh, that's something that your CPA can help walk you through. But you know, you can pay the corporate tax at the corporate level or you can pay it at the personal level. So most people just, well, everything passed through the personal return and they file it there. Uh, if you file it as a business expense at the S corp level, right then you get that deduction off your business tax return. So that that's something to consider. Uh, and then also, I mean, if you have any expenses that are going to carry into 2025, you maybe go ahead and write checks and expense those this year as opposed to waiting for 25. It all depends what you're trying to do.

Speaker 1

Business owners, we have to be careful because if you, if you write off too much and you have less net return, net gains than you did the year prior, you try to get a business loan, they'd be like, well, what's wrong with your business? You're losing money. It's like, no, I just being tax smart, right, a banker doesn't understand. Understand tax smart. I mean, I, quite honestly, bankers don't understand much of anything. I don't. I talk to bankers and I'm like how do you not know anything about business? So you need to make it easy for them where you're showing them a gain every single time, year over year, ideally. So don't expense too much to where you have losses.

Speaker 1

Also, if you're trying to sell your business, uh, buyers don't understand why you don't. You know the. All they know about your business is the P and L's that you show them. So those are the years it's probably better just to pay a higher tax and and not try to hide your family vacation somewhere inside your your P and L. You need to. You need to have, um, uh, show as much profit as possible. So it depends on what you're doing. If you're trying to get loans, maybe it's better not to be as tax smart for that year. But if everything's going great, you might consider 20, 25 expenses in 24. Of course, that means in 25, you're gonna be paying more tax. But a dollar right, two birds in the hand, whatever that saying means.

Speaker 2

So then I guess you look at the end of 25 and start pushing 26 expenses 25. It's like you're always.

Speaker 1

If you can do that, yeah, you can afford bonuses. Maybe it's better to do those in the in the year, uh, the same year, versus, you know, doing traditional like February, march bonuses for the year prior. Uh, if you're prepared to do that, uh, some people don't have their P&Ls ready enough in time for that. But anyway, there's a lot of different things you can do as business owners that have legit businesses, not the businesses that are hobbies that you're trying to lose money on.

Speaker 4

Right On purpose.

Speaker 1

I've never said that I get that question often, but anyway, I think that's kind of the top of our list. The big thing is, you sit down, you understand what's happening in your overall financial picture, and that's what's great about financial planning is for our clients. We have that picture always, as long as you're coming in for review meetings, we have that picture beings we have. We have that picture, uh, and so it's much, much easier for us to give advice when we can see, uh, what the long-term plan is and what we need to do in short term with money. Because, again, it's really hard to read magazines, even listen to a podcast, and and think how do I apply that to myself personally, right, uh, but anyway, thanks for listening today's episode.

Speaker 1

If you're interested in learning more about wiser wealth management, I want to work with one of our fiduciary feeling advisors. You can do so by clicking on our show notes. You can go to wiserinvestorcom. Sean, I'll be happy to work with you. Missy, I'd be happy to work with you. They're trying to get me out of giving financial advice and just be a CEO. It's really hard. I like working with you guys, but we have a couple other episodes you might look at.

Speaker 1

We have episode from last year, 196, your year-end financial planning checklist episode 190, year-end tax moves planning ahead for stress-free tax season. And then don't forget about our YouTube channel. Reduce your Taxes in AGI by Giving to Charity. And then, what is the best way to take your RMD? Those are all YouTube videos that we did a little while back. Also, if you have a minute, wherever you're listening to this podcast, go and like it and subscribe and tell the people about it. We have so many new listeners and we're really excited about this, so keep helping us grow the brand of fiduciary fee only wealth management. Thanks, guys, we'll see you next week.

Speaker 4

Thanks for listening to a wiser retirement podcast. We hope you enjoyed today's episode. Make sure to subscribe wherever you're listening. That way you don't miss any new episodes. We'd also appreciate if you could leave a rating and review. If you have any questions about anything that was discussed today, head to wiserinvestorcom and reach out. This episode was produced by Rachel Dotson. This podcast is strictly for informational purposes only and is not to be considered as investment advice or a solicitation to buy or sell any financial products, securities, digital assets or any other investment vehicles, or a basis to make any financial decisions. Wiser Wealth Management Incorporated is a registered investor advisor with the SEC. The host and or guests may personally own securities digital assets. Thank you, listeners. Or similar interests. Investments involve risk and, unless otherwise stated or not guaranteed, be sure to first consult with a qualified financial advisor, tax professional, insurance professional and or legal professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.