Hi friends,

As we approach the end of the year, I like to help make sure people feel confident about their finances. I created our 2024 End Of Year Financial Planning Checklist for High Income Earners in the Bay Area. Please let me know if you find it useful and if you have any planning needs that I can help with.

What’s on my mind: What the election results could mean for your taxes:

With Republicans in control, the future of the Tax Cuts & Jobs Act (TCJA) has shifted from “Will it expire in 2025?” to “What parts will stay, and what will change?” Here’s a breakdown of what’s likely to happen:

• Income Tax Rates:
  • Current brackets (1%-4% lower than pre-TCJA levels) are likely to remain, along with the bigger standard deduction. However, the $10K SALT cap, which limited the amount of state and local taxes that you could deduct to $10K, remains uncertain.
  • What this means: High earners benefit from lower taxes, and Californians or residents in high-tax states could see relief if the SALT cap is removed or reduced.
• Estate and Gift Tax Exemptions:
  • The Trump tax cuts had a profound effect on estate tax planning for high net-worth families, as it doubled the lifetime gift and estate tax exemption to $13.6M per person in 2024. It seems likely that the exemption will remain at its higher levels for now.
  • What this means: For high net-worth families, there is less urgency to gift or transfer assets out of an estate. In fact, it may be better to avoid gifting assets in order to maintain the benefit of basis step-up if held until death.

• Qualified Business Income (QBI) Deduction:
  • To match the cut in corporate tax rates under the TCJA tax changes, the QBI deduction was introduced which allowed pass-through business owners (e.g. sole prop, LLC, S-corp) to deduct up to 20% of their Qualified Business Income. This 20% deduction is expected to continue. And if corporate taxes are lowered further, QBI deductions might increase too.
  • What this means: Small business owners could see a boost in after-tax income.
• Child Tax Credit & Energy Credits:
  • The Child Tax Credit ($2,000 per child) will likely stay and may even increase. However, energy credits (e.g., for solar panels and EVs) from the Inflation Reduction Act could face cuts.
  • What this means: Families with kids continue to benefit, but those eyeing energy upgrades should consider acting sooner than later, as these credits may be reduced or repealed.

Photo from our Lives:

This month we held our first Client Appreciation Happy Hour to bring together like minded-professionals. Our team member, Cathy, flew in from Boston for the event and her first Warriors game. Very grateful for our Modern Family Finance, team, clients, and community this Thanksgiving.