Column: Financial tax planning for 2024? More like 2025.

By Jason Glisczynski

As 2025 approaches, several key tax provisions are set to expire, potentially impacting both business owners and individuals. It’s crucial to understand these changes for effective financial planning. I am dedicated to providing you with detailed and clear insights.

For Businesses: Navigating Through Crucial Tax Changes

1. Qualified Business Income Deduction (Section 199A): This deduction currently provides a 20% reduction on pass-through business income. Its expiration could lead to increased tax liabilities for businesses. Early planning and exploring other tax-saving avenues are essential to mitigate this impact.
2. Work Opportunity Tax Credit: This incentive for hiring individuals from specific groups is expiring soon. Its potential absence in your future financial planning could affect hiring strategies and overall payroll costs, urging businesses to maximize its use now.
3. Employee Retention Tax Credit (ERTC) Claims: The ERTC has been vital for businesses during economic challenges. With deadlines approaching, it’s critical to assess eligibility and file promptly to benefit from this relief.

 For Individuals: Preparing for Tax Changes

1. Individual Income Tax Rates: The post-2025 increase in tax rates could significantly affect your financial planning. Reviewing current strategies to minimize future tax impacts is advisable.
2. Child Tax Credit: The decrease in this credit can impact family finances, especially for those with multiple children. Adjusting financial plans to accommodate this change is crucial.
3. Alternative Minimum Tax (AMT) Exemptions: The expiration of increased AMT exemptions could raise tax liabilities for high-income earners, making it important to review and adjust investment strategies.
4. Standard Deduction and Personal Exemption: The expected decrease in standard deduction amounts will likely result in a higher tax burden, prompting the exploration of additional tax-saving strategies.
5. State and Local Tax (SALT) and Mortgage Interest Deductions: Changes in these deductions could significantly affect homeowners, especially in high-tax states. Rethinking the benefits of homeownership and mortgage planning might be necessary.
6. Charitable Contributions: With the expected reduction in the deduction limit, front-loading charitable contributions could be a wise strategy to maximize tax benefits.
7. Job Expenses & Miscellaneous Deductions: The return of these deductions could benefit employees with significant job-related expenses, underscoring the importance of maintaining detailed expense records.
8. Limitation on Excess Business Losses: Industries with high income variability might find this change impactful. Strategic tax planning becomes vital to manage these fluctuations.
9. Estate Tax Exclusion: The reduction in estate tax exclusion post-2025 necessitates a review of estate plans, particularly for high-net-worth individuals.

The Advantage of a Virtual Family Office (VFO) Approach

In addressing these upcoming changes, the value of a Virtual Family Office (VFO) framework becomes evident. Leveraging a VFO approach brings together a collaborative team of diverse professionals – from tax experts and financial planners to legal advisors and investment strategists. This multi-disciplinary team works in unison to provide a comprehensive, tailored financial strategy that covers all aspects of your financial life.

Think of a pit crew for NASCAR or a Formula 1 race team.  They work lightning fast, efficiently, and collaboratively to get the car in and out of the pits with fresh tires, a clean windshield, and the perfect amount of fuel to optimize performance in mere seconds.  Imagine if the car had to make one stop for tires, another stop for fuel, and yet another to get the windshield clean.  Silly, right?

Well, that is exactly what traditional financial planning (without a VFO) is like.  You make multiple stops for all your needs; stop by the financial person, then head over to the insurance person, next stop the tax man, and finish your day in the lawyer’s office.  This haphazard uncoordinated effort leads to lost time, inefficiency, missed opportunities, and higher overall costs. Frankly, it’s dangerous.

The collaboration within a VFO allows for a holistic view of your financial landscape. It ensures that every angle is considered, from tax implications and investment strategies to estate planning and business structuring. This integrated approach not only helps in navigating the complexities of the expiring tax provisions but also positions you to capitalize on opportunities and minimize risks.

With a VFO, you gain access to top-tier expertise across various financial disciplines, all coordinated to work for your benefit. This synergy ensures that every piece of advice you receive is aligned with your overall financial goals and objectives, providing peace of mind and a clearer path to financial success.

Jason Glisczynski is co-owner and principal advisor for Silvertree, LLC.  He is a Certified Financial Planner™ Professional and a Certified Private Wealth Advisor® Professional, and specializes in working with business owners, executives, and workers in manufacturing.

Investment Advisory Services offered through Brookstone Capital Management (BCM) LLC, a Registered Investment Advisor. Silvertree, LLC and BCM are separate companies.  Visit www.silvertreeplan.com for more information.