As the year comes to a close, high-net-worth individuals and families have a prime opportunity to optimize their financial plans with proactive tax strategies. At GatePass Capital, we understand the importance of aligning your wealth management with tax efficiency to preserve and grow your assets. Below are key year-end tax planning strategies to consider:

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1. Maximize Retirement Contributions

Take full advantage of retirement account contributions to reduce taxable income:

401(k) Plans: Contribute the maximum allowable amount ($23,000 for 2024, or $30,500 if aged 50+).

IRAs: Make contributions to traditional IRAs, potentially reducing taxable income if within income limits.

Backdoor Roth IRA: For those above income limits for Roth contributions, consider this strategy to create tax-free growth opportunities.

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2. Accelerate Deductions or Defer Income

Accelerate Deductions: Consider prepaying property taxes, mortgage interest, or charitable contributions to take advantage of current-year deductions for taxpayers that itemize deductions.

Defer Income: If feasible, defer income into 2025 to delay taxation, especially if you anticipate being in a lower tax bracket next year.

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3. Review Investment Portfolios for Tax-Loss Harvesting

Offset capital gains by selling underperforming investments to realize losses. This can reduce taxable income while rebalancing your portfolio.  Be sure to work with your financial advisor to avoid triggering any wash sales.

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4. Take Advantage of Charitable Giving Opportunities

For philanthropic clients, strategic giving can benefit both your financial plan and the causes you care about:

Donor-Advised Funds (DAFs): Contribute to a DAF for an immediate tax deduction while recommending grants to charities over time.

Qualified Charitable Distributions (QCDs): For clients aged 70½ or older, direct contributions from IRAs to qualified charities can satisfy Required Minimum Distributions (RMDs) without increasing taxable income.

Appreciated Assets: Donate appreciated securities to avoid capital gains taxes while receiving a deduction for the full fair market value.

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5. Plan for Gift and Estate Tax Exclusions

Annual Gift Exclusion: Use the 2024 gift tax exclusion to gift up to $18,000 per recipient ($36,000 for married couples) without triggering gift taxes.

Lifetime Exemption: Review the current $13.61 million estate and gift tax exemption (set to sunset to in 2026 if not extended) to assess opportunities for large gifts or transfers.

Grantor Retained Annuity Trusts (GRATs) and Irrevocable Life Insurance Trusts (ILITs): Consider strategies to reduce estate taxes for future generations.

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6. Review Business Tax Strategies

For business owners, year-end planning offers additional opportunities:

Bonus Depreciation: Leverage the phased-out bonus depreciation rules (60% for 2024) to deduct qualified property.   Section 179 expense, which is a full write off for qualified business property, may also be available for businesses.   Consult with your financial advisor or tax advisor to determine if your business qualifies.

Retirement Plans for Business Owners: Evaluate implementing or maximizing contributions to SEP IRAs, SIMPLE IRAs, or Solo 401(k)s.

Qualified Business Income Deduction (QBI): Review eligibility for the 20% deduction on pass-through income for qualified businesses.

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7. Leverage Health Savings Accounts (HSAs)

If enrolled in a high-deductible health plan, maximize HSA contributions for triple tax benefits: pre-tax contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.

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8. State Tax Considerations

High-net-worth clients often have multi-state or residency considerations. Work with your tax advisor to address state-specific tax rules, particularly if you’ve changed residence or have property in multiple states.

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9. Evaluate Trusts and Wealth Transfer Plans

Review the structure of your trusts and estate plan to ensure alignment with current tax laws. Consider strategies like generation-skipping trusts or spousal lifetime access trusts (SLATs) to minimize estate taxes.

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Final Thoughts

Effective year-end tax planning requires a tailored approach based on your unique financial situation. By acting before December 31st, you can take advantage of strategies that reduce your tax liability while supporting your broader wealth goals. At GatePass Capital, we work closely with our clients to implement thoughtful, proactive solutions. Reach out to our team to discuss how these strategies can fit into your plan.

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