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3 Tax Strategies for Individuals in 2024

December 07, 2023

Individuals will want to play close attention to gifting strategies, Required Minimum Distributions (RMDs) and more heading into 2024. Here are some helpful tax strategies for you.

Have you downloaded our Year End Tax Planning Guide for Individuals yet? Be sure to check it out for some valuable tax saving strategies for year end and heading into 2024. Here’s a look at what’s top of mind for individuals heading into 2024.

  1. Gifting strategies- The potential sunset of the lifetime exemption for gifting is looming. Through 2025, the TCJA substantially increases the unified federal gift and estate tax exemption and the generation-skipping transfer (GST) tax exemption. It also maintains the step-up basis rules and the portability provision for married people. $12.92 million is the 2023 lifetime exemption. $25.84 million is the 2023 lifetime exemption for married couples if they implement proper planning. 40% is the top tax rate that applies to taxable estates that exceed the exemption amount.
    1. Tip for individuals heading into 2024- Not ready to give away your wealth or give up control? There are strategies that can help you still benefit from the lifetime exemption but maintain control, particularly with a family business. One such strategy would be to gift non-voting interests in the company. If the company doesn’t currently have non-voting interests, a company re-structuring may be beneficial to allow for that type of ownership. You can then transfer a large amount of ownership in non-voting stock. You can continue owning voting shares and retain control of the company, while giving away up to 99% of ownership to the next generation.
  2. Energy tax credits- The Inflation Reduction Act (IRA) offers some tax breaks for energy-efficient home improvements, including solar panels, energy-efficient water heaters, heat pumps and HVAC systems. The new law also modifies a credit for new home construction that meets certain requirements.
    1. Tip for individuals heading into 2024: These changes took effect January 1, 2023, so if you invest in qualifying home improvements this year, you may be eligible for a tax break when you file your 2023 return.

  3. RMDs- The age for beginning required minimum distributions (RMDs) increased from 70 ½ to 72 under the SECURE Act, and it increases again, to 73, under SECURE 2.0, for taxpayers born after December 31, 1950. (If you turn 73 in 2023, however, you are subject to the age 72 RMD rule in effect for 2022. You had until 4/1/2023 to take your 2022 RMD and must take your 2023 RMD no later than 12/31/2023.) Check out Your Guide to RMDs for more details on the requirements.
    1. Tip for individuals heading into 2024- IRA owners who turn 72 in 2023 (born in 1951) will have until April 1, 2025 to pull out his or her 2024 RMD. However, if you choose not to take the initial RMD in 2024 and instead delay until April 1, 2025, you will need to take two RMDs in 2025. Your 2025 RMD must be withdrawn before December 31, 2025.

If you don’t need the money, you have some alternatives-- You can opt to donate up to $100,000 of your RMD from an IRA directly to charity through a Qualified Charitable Distribution (QCD). Another option is using the RMD to purchase long-term care insurance. Lastly, you might consider reinvesting the money in taxable accounts. This includes deposit accounts, taxable brokerage accounts and municipal bonds.

It’s best to take a long-term approach to all of your tax planning strategies. Need help assessing your individual situation? We can help. Contact us.

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