TAX PLANNING

move to a state with no income tax , such as Florida , Texas or Wyoming . “ Maybe you wait until they ’ ve established residency there and then do the conversion to save state taxes ,” Fundora says .

You ’ ll also want to look into whether a conversion would affect the client ’ s future Medicare premiums . People with higher incomes pay more in premiums through the income-related monthly adjustment amount , or IRMAA , and the taxable income created by a Roth conversion could trigger those higher amounts .

Other Potential Changes

The demise of the Tax Cuts and Jobs Act would chop your client ’ s standard deduction to roughly half of the 2024 levels , which are $ 29,200 on a joint return and $ 14,600 for single filers . Yet the law change would also make it easier to itemize . So pushing deduction-generating events to 2026 could prove savvy .

Take , for example , a client with a donor-advised fund who won ’ t benefit from itemizing in 2024 . According to Steven Warren , a senior manager at Schechter Dokken Kanter CPAs in Minneapolis , clients donating to charities from these

funds this year won ’ t generate deductions , but can ’ t use them anyway . However , if the law changes , Warren says , the standard deduction would go down . “ After the change ’ s effective date would be a good time to either replenish the donoradvised fund or give directly to charities . They ’ d get a charitable deduction [ then ] and may be better able to take advantage of itemizing .”

The potential sunset of the Tax Cuts and Jobs Act leaves estate taxes up in the air , too . The end of the law would mean the estate tax exemption falls about 50 % from $ 13.61 million per person this year . Vice President Kamala Harris supports taking it lower , to $ 3.5 million , as well as raising the tax rate to 55 % or higher , depending on the estate ’ s size .

But we ’ ve seen this movie before . The Bush tax acts ’ expiration would have reduced the estate tax exemption , and some clients made gifts in anticipation of that possibility — only to find they parted with funds they needed for themselves .

Nevertheless , clients who would be affected by a smaller estate tax exemption should be preparing now , says Warren . “ I encourage them to sit down with their es-

tate planning attorney who really specializes in this . And if they don ’ t have one , I encourage them to get one .”

Don ’ t Overlook Estimated Taxes

Anyone with significant interest income probably should have been making quarterly tax payments this year . “ And some people aren ’ t withholding from their Social Security the way they should . It ’ s like a foreign concept ,” says Jeremy Keil , with Keil Financial Partners in New Berlin , Wis . He thinks that ’ s partly because taxpayers must proactively request withholding from their federal benefits , either by calling the Social Security Administration or submitting Form W-4V .

Advisors should urge their existing and prospective clients to remedy payment deficiencies as soon as possible , preferably with additional withholding from their Social Security , paycheck or pension payments for the rest of the year , or by withholding tax from a late-year retirement plan distribution . These will be treated as if they have been paid evenly throughout the year and help taxpayers make up for shortfalls in earlier quarters , Keil says . “ That will help reduce penalties .”

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46 | FINANCIAL ADVISOR MAGAZINE | NOVEMBER 2024 WWW . FA-MAG . COM