End-of-Year Financial Planning Opportunities for 2024: Navigating the Post-Election Landscape
As 2024 draws to a close, financial planning takes center stage, especially in light of the recent election results. With a clean sweep for Republicans, some of the more urgent planning topics have become less important - like maximizing your estate exemption while it is still elevated and performing Roth conversions in preparation for the increase in tax rates.
The political landscape suggests that the current tax framework under the Tax Cuts and Jobs Act (TCJA) will likely remain intact as large-scale extensions of the act are anticipated. While many uncertainties have been cleared, there are still some planning opportunities out there!
Why 2024 Planning is Simpler Than Ever
The election outcome provides clarity. With Republican control, it’s highly probable that the tax laws currently in place will continue without dramatic shifts, making this a stable year for financial decisions. The TCJA was scheduled to sunset in 2025, but with the election results, an extension is likely, reducing the urgency to brace for higher taxes next year.
A Couple of Planning Opportunities to Keep in Mind for 2024
1. SALT Deduction Strategy
There are still a couple of changes on the table. One of the most significant changes could come from the potential repeal of the $10,000 cap on State and Local Tax (SALT) deductions. This would increase the amount of the itemized deduction you could take on your federal return for the amount you pay in State and Local Taxes, potentially moving back to the unlimited SALT deduction we had in the past. While nothing is guaranteed, a repeal could make deferring certain SALT tax payments into 2025 advantageous.
Considerations:
If the SALT cap is repealed, you may be able to fully deduct state, local, or property taxes in 2025.
If you have already paid $10k or more in SALT taxes for 2024 thereby reaching the current limit, it may benefit you to defer additional SALT tax payments to 2025.
Strategy: Make remaining state and local tax or property tax payments for 2024 in January 2025 if you’ve already reached the $10,000 cap in 2024. If the cap is lifted, you’ll benefit from the higher deduction next year. Work closely with your financial professional to ensure you will not incur additional fees or penalties by delaying your payments.
2. Electric Vehicle (EV) Tax Credits
The $7,500 EV tax credit remains a lucrative incentive, but under the current political outlook, it could be repealed in 2025. Income thresholds still apply, with the credit phasing out for households earning over $300,000 (joint) or $150,000 (single).
Why act now?
Potential phase-out or repeal in 2025 makes 2024 the ideal time to buy.
As the expiration of the credit looms, dealers may raise prices in anticipation of heightened demand. Purchasing now ensures you maximize the current credit before it potentially disappears.
Planning Tip: If you’re considering an EV, act before the end of 2024 to lock in the credit while it’s still available.
With the political landscape signaling stability, this end-of-year planning season will not be as hectic as it could have been. While key provisions—like the potential SALT cap repeal and EV tax credits—introduce new planning opportunities, there are always reoccurring opportunities no matter the tax code. Whether it’s maximizing deductions, leveraging tax credits, or optimizing retirement strategies, there are certain planning considerations that should be reviewed every year. We are happy to provide these services to our existing clients yearly!
Will Cocking CFP®, CPWA®
Director of Financial Planning