INCOME TAX PLANNING

• Harvest capital losses to offset any realized gains or rebalance taxable investment accounts.
• Consider harvesting any capital gains that can be realized in the 0% tax bracket.
• Review charitable contributions to maximize income tax deductions.
  • Consider donation of appreciated assets that have been held for more than one year, rather than cash.
  • Opening and funding a Donor Advised Fund (DAF) as it allows for a tax-deductible gift in the current year and also the client’s ability to dole out those funds to charities over multiple years.
  • Qualified Charitable Distributions (QCDs) are another option for those over 70.5 and especially for those who don’t typically itemize on their tax returns.
• Weigh the benefits of converting Traditional IRA to a Roth IRA to lock in lower tax rates on some pre-tax retirement accounts.
  • Remember that Roth Conversions can no longer be recharacterized so there’s no reversing once executed.
  • Keep in mind that Roth conversions will be more beneficial when the tax can be paid by funds outside of the IRA.
• Remember that all IRA balances are included in the tax calculation of the conversion
• Maximize contributions to a retirement plan, SEP IRA (self-employed) and Health Savings Accounts.
• If age 72 or older or are a beneficiary of an applicable inherited IRA, take the required distributions before 12/31.
• If income is expected to increase in the future, consider making Roth 401(k) contributions.
• Review income tax withholding on retirement account distributions or wages and recommend any
• Review the timing of income and deductions such as payments for tuition.

ESTATE & GIFT PLANNING

• ake use of annual exclusion gifts.
• Capitalize on the unlimited gift exemption for direct payment of tuition and medical expenses.
• Consider gifting to a 529 plan by year-end if saving for a child's or grandchild's education.
  • Many states offer tax deductions for residents contributing to their state programs.
  • Consider gifting up to 5 years of the annual exclusion amount to an individual’s 529 plan and filing a gift tax return, electing to treat it as if it were made evenly over a 5-year period.
• Confirm wills, trusts, and power of attorneys are up-to-date and consistent with current plans.
• Review lifetime gift and GST gifting opportunities to use additional applicable exclusion and exemption amounts

RETIREMENT, INVESTMENTS AND OTHER PLANNING

• Are there any major life changes such as marriages or divorces, births or deaths in the family, job or employment changes, changes in residency, and significant planned expenditures (real estate purchases, college tuition payments, etc.)?
• Are pre-tax and Roth contribution amounts to retirement accounts for the new year updated and accurate?
• Review various insurance policies and confirm whether the amount of coverage and deductibles are still adequate.
• Review beneficiary designations and update, as necessary.
• Confirm that Flexible Spending Account balances have been spent or there is a plan to spend the entire balance and set next year’s contribution amounts.
• Review the investment portfolio and target asset allocation. Confirm whether the allocation is within the targeted ranges for each asset class as recent market performance could have caused allocations to drift dramatically.
• Review any scheduled 4th quarter estimated tax payment needs and assess any liquidity for payments.
• Consider an additional tax payment or increase in tax withholdings to eliminate a penalty or changes in a tax situation for the year.
• Evaluate progress towards financial goals and review goals for the year and any changes in long term goals.
• Plan for the unique change for IRA and 401(k) required minimum distributions for the upcoming year and beyond. With the change in the lifetime expectancy factors, required minimum distributions (RMDs) amounts could be somewhat smaller than prior years.

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This letter summarizes key provisions affecting individual and business taxpayers.

Individual income tax provisions

• Permanent extension of lower tax rates and brackets: The OBBBA generally makes the tax rates enacted in 2017 in the Tax Cuts and Jobs Act (TCJA) permanent. An additional year of inflation adjustment is added for determining the dollar amounts at which the 12% rate bracket ends and the 22% rate bracket begins.
• Standard deduction: The nearly doubled standard deduction would be made permanent. Effective for 2025, the amounts are as follows:
• Single & Married Filing Separately (MFS): $15,750 (indexed)
• Head of Household (HoH): $23,625 (indexed)
• Married Filing Jointly (MFJ): $31,500 (indexed)
• Child Tax Credit: The nonrefundable child tax credit increases to $2,200 per child beginning in 2025 and the credit amount is indexed for inflation.
• Estate and gift tax exemption: The increased exemption is made permanent and raised to $15 million per individual ($30 million for married couples) in 2026, indexed for inflation.
• SALT deduction cap: The state and local tax (SALT) deduction cap is increased to $40,000 per household and would be phased out for taxpayers with modified adjusted gross income (MAGI) over $500,000. In 2030, the deduction will revert to $10,000.
• Charitable deduction (cash only) for non-itemizers: An above-the-line deduction is added for charitable contributions that starts in 2026 ($1,000 for single filers, $2,000 for joint filers).
• No tax on tips and overtime: For 2025–2028, above-the-line deductions are created for qualified tips (in certain occupations) and for overtime premium pay, subject to income and occupation limitations.
• Enhanced deduction for seniors: For 2025–2028, a $6,000 deduction is available for seniors (age 65+) with income below $75,000 ($150,000 for joint filers).
• Car loan interest deduction: For 2025–2028, up to $10,000 of interest on loans for U.S.-assembled passenger vehicles may be deducted, subject to income phaseouts.
• Moving expense deduction: The deduction is permanently terminated except for those in the Armed Forces.
• Home mortgage interest and insurance premiums: The $750,000 limit on the treatment of mortgage insurance premiums as qualified residence interest is made permanent. The exclusion of home-equity indebtedness from the definition of qualified residence interest is also now permanent.
• Casualty loss deduction for personal casualties: The limitation on personal casualty loss deductions is made permanent, however a provision is added to include state-declared disasters.
• Other deductions and credits: Several other deductions and credits, including the adoption credit, employer-provided childcare credit, paid family and medical leave credit, and education-related benefits are made permanent.

Business tax provisions

• QBI deduction: The qualified business income (QBI) deduction is made permanent and the deductible amount for each qualified business would remain at 20%.
• Bonus depreciation: 100% expensing (bonus depreciation) for qualified property is restored for property placed in service after Jan. 19, 2025.
• Sec. 179 expensing: The maximum amount a business may expense for qualifying expenses is increased to $2.5 million, with the phaseout threshold raised to $4 million, both indexed for inflation after 2025.
• R&E expenditures: Immediate deduction of domestic research or experimental expenses paid or incurred in 2025 is allowed. However, research or experimental expenses attributable to research that is conducted outside the United States will continue to be capitalized and amortized over 15 years.
• Excess business loss permanency: The excess business loss limitation is made permanent, and the existing treatment of loss carryforwards is maintained.
• Business interest deduction: The interest expense limitation is calculated using earnings before interest, taxes, depreciation and amortization (EBITDA), rather than earnings before interest and taxes (EBIT).
• FDII and GILTI: Beginning in 2026, the deduction percentage is reduced to 33.34% for foreign-derived intangible income (FDII) and 40% for global intangible low-taxed income (GILTI).
• BEAT: The base-erosion and anti-abuse tax (BEAT) rate is increased from 10% to 10.5%.
• Third-party network transaction reporting threshold: Form 1099-K, Payment Card and Third Party Network Transactions, reporting reverts back to previous rules where reporting is required if transactions exceed $20,000 and the aggregate number of transactions exceeds 200.
• Form 1099 reporting threshold: The information reporting threshold for payments for services increases to $2,000 in a calendar year (up from $600) in 2026, and the threshold amount will be indexed annually for inflation starting in 2027.
• Renewed Opportunity Zones: Opportunity zones provisions are made permanent, but with several changes, including narrowing the definition of “low-income community.” The changes will generally take effect in 2027.
• Clean energy and IRS credits: Several clean energy credits from the Inflation Reduction Act (IRA) are terminated.