2024 Year-End Insights & 2025 Outlook

2024 Year-End Insights & 2025 Outlook

As 2024 draws to a close, we want to help you tie up loose ends, meet important deadlines, and set the stage for a successful year ahead. Below, we’ve outlined key financial dates and updates to keep in mind as you finish the year strong and prepare for 2025.

Closing Out 2024: Key Actions Before Year-End

Retirement Accounts

• Required Minimum Distributions (RMDs): If you have a Traditional or Inherited IRA, ensure your RMD is taken by December 31, 2024. Our team is here to assist—if you need to update your withdrawal instructions, let us know as soon as possible. Additional paperwork may be required to complete changes before the deadline, and we want to make the process as smooth as possible for you.
• Employee Retirement Contributions: Contributions to your 401(k), 403(b), 457, or SIMPLE plans must be made by December 31, 2024. Contributions to Traditional, Roth, and SEP IRAs, however, can be made until April 15, 2025, when taxes are filed. If you’re unsure how much to contribute, we’re happy to help you review your options.

Charitable Giving Deadlines with Schwab

• Grant Requests: Charitable organizations often need extra time to process requests due to high volumes. If you plan to give through Schwab Charitable this year, submit your grant requests by Monday, December 9, 2024.
• Donor-Advised Fund Contributions: Contributions to a Schwab Donor-Advised Fund (DAF) from your investment account must be requested by December 20, 2024. Contributions by check must be postmarked by December 31, 2024. Transfers of assets such as mutual funds or stocks from other firms can take two to four weeks to process. We recommend initiating your transfer as soon as possible to avoid delays, as assets must be received by December 31, 2024.

Gifts and 529 Contributions

• Gift Tax Exclusion:

• The gift tax exclusion for 2024 is $18,000 per recipient.

• • Donations to a 529 account also count as gifts for tax purposes, and they are currently limited to $18,000 in 2024, per person. If you want to maximize contributions, ensure they are made by December 31, 2024.

Looking Ahead to 2025

The IRS announced the 2025 tax year annual inflation adjustments for many of its provisions, including the contribution limits for retirement accounts, updates to estate planning considerations, tax rate schedules, and other tax changes.

Retirement Accounts

• Increased Contribution Limits:
  • For 401(k), 403(b), and 457 plans, all contributions must be made by December 31, 2025, to count toward the 2025 tax year. The contribution limits are as follows:
    • Base Contribution: You can contribute up to $23,500.
    • Catch-Up Contributions:
      • If you’re between the ages of 50 and 59, or 64+, you can add up to $7,500 in catch-up contributions, increasing the total to $31,000.
      • If you’re between the ages of 60 and 63, you qualify for an enhanced catch-up contribution of $11,250, bringing the total to $34,750.
  • For Traditional and Roth IRAs, the contribution limit is $7,000 in 2025. If you are 50 or older, you can make an additional $1,000 catch-up contribution, bringing the total to $8,000. Contributions for the 2025 tax year can be made up until the tax filing deadline in April 2026.
  • For SEP IRAs, contribution limits increase to $70,000 or 25% of employee compensation, whichever is lower. Contributions can be made up until the tax filing deadline in April 2026.
  • For SIMPLE IRAs, all salary reduction contributions must be made by January 30, 2026, while employer contributions can be made by the tax filing deadline in 2026. The contribution limits are as follows:
    • Base Contribution: You can contribute up to $16,500.
    • Catch-Up Contributions:
      • If you’re between the ages of 50 and 59, or 64+, you can add up to $3,500 in catch-up contributions, increasing the total to $20,000.
      • If you’re between the ages of 60 and 63, you qualify for an enhanced catch-up contribution of $5,250, bringing the total to $21,750.
• Saver’s Credit Income Range Adjustment: The income ranges for determining eligibility to make deductible contributions to IRAs, contribute to Roth IRAs, and claim the Saver’s Credit have increased for 2025. For details, refer to IRS Notice 2024-80 or contact us for specific guidance.

Estate and Gifting Updates

• Federal and Washington State Exemptions:
  • The federal estate tax exemption increases to $13,990,000 per individual (or $27,980,000 per married couple) in 2025.
  • The Washington state estate tax exemption is expected to remain at $2,193,000 in 2025.
• Annual Gift Tax Exclusion:

• The gift tax exclusion for 2025 is $19,000 per recipient ($38,000 per couple to the same recipient).

• • Donations to a 529 account also count as gifts for tax purposes, and they are also limited to $19,000 in 2025, per person. If you want to maximize contributions, ensure they are made by December 31, 2025.
• Upcoming Sunset of Higher Exemptions: The current federal estate tax exemptions are set to sunset on January 1, 2026. Without legislative changes, the exemption will revert to approximately $7 million for individuals and $14 million for married couples, adjusted for inflation. We are advising clients to work with their estate planning professionals early to see what thoughtful planning can be done if the provisions sunset.

Charitable Giving Opportunities

• Qualified Charitable Distributions (QCDs): If you’re aged 70½ or older, you can direct up to $108,000 from your IRA to a qualified charity in 2025. This is a tax-smart way to meet RMD requirements while supporting causes close to your heart.

How We Can Help You Prepare

We’re here to ensure you end 2024 with confidence and start 2025 ready for what’s ahead. Here are a few potential next steps:

• Year-End Tax Strategy Review: Contact us to review your tax strategy, maximize retirement contributions, and explore other tax-saving opportunities.
• Charitable Donations: If you’re planning to make charitable donations —especially with appreciated securities—starting the process early will help to ensure everything is completed on time.
• Estate and Gifting Plans: With potential changes in estate tax laws on the horizon, 2025 is an excellent time to revisit your estate and gifting plans. Let us know if you’d like to schedule a review with us and your estate planning attorney.

In summary, this is a great time to tie up year-end items and begin planning for the year ahead. How do these changes impact your savings for 2025? Are there any adjustments you should make to your financial plan?

Please consider us a trusted resource for you, your family, and your friends when these or other planning questions arise. We welcome any conversations or questions as you reflect on your financial picture.

With Optimism,

The Tschetter Group Planning Team

Disclosure: The content of this article is provided for general information purposes only. The information was compiled from sources that we believe to be reliable, however, we cannot guarantee accuracy. Tschetter Group does not provide tax or legal advice. Please consult your legal or tax professional for specific information.