Key insights
- As we look ahead to 2024, we see a return to normalcy in the economy, markets, and industry, making it an ideal time to plan for the future as a business owner or individual.
- Individuals and businesses are now adapting to higher interest rates and will focus on driving bottom line profits through efficiency and new market growth.
- Some key tax benefits are scheduled to sunset in the end of 2025 — start planning now to determine actions you can take to mitigate potential negative financial impact.
Are you combining financial and tax planning to improve results?
The last few years have been extremely volatile. The decade started with COVID-19 — the biggest disruptor in 50 years — followed by additional challenges of supply chain interruptions and record high inflation.
As we look ahead to 2024, we largely see an end to these extremes. A return to normalcy means it’s a great time to plan for the future.
2024 expectations — resilient but measured growth
While the end of extremes may bring an end to high market growth, there is still an expectation of healthy growth in both the economy and markets for the upcoming year. Despite the persistence of high interest rates, individuals and businesses have largely acclimated to these conditions, resulting in a projected modest yet steady GDP and market growth backdrop for 2024. This resilient and measured market environment provides a solid foundation for investing and planning.
2024 planning guidance
With more stability expected, now is a key time to invest, prepare, and safeguard your business and investments.
Invest — Focus on segments with strong profit margins while controlling costs. Businesses and individuals alike can use this guidance. For individuals, it can be used to build a portfolio that aligns with your long-term goals. To stay ahead of the “tax” that inflation has on uninvested cash, we suggested investing in a diversified basket of stocks, bonds, and alternatives. And don’t forget to consider the tax implications and expenses of your investment strategy which also significantly impacts your overall returns.
Prepare — Continued higher interest rates are an opportunity to improve your business cost structure using digital strategies and focusing on working capital management. Digital strategies — including automation, big data, artificial intelligence, and large language models — have the potential to be as impactful as the internet has been, or even more so. Businesses can use digital strategies to find opportunities to streamline processes and boost top line growth. For individuals, estate planning strategies are an effective way to transition wealth to future generations or impact your communities through charitable giving.
Looking ahead to 2024, we anticipate a return to economic normalcy following several years of extreme economic and market volatility. This presents an important opportunity to plan for your future, factoring in anticipated tax changes.
Safeguard — Protect your business and yourself by diversifying income streams, using insurance, and preparing for regulatory changes. As your business and individual finances grow, safeguarding assets is very important, which often means purchasing insurance. Personal insurance, such as long-term care and additional health coverage, is often overlooked, but it can provide crucial financial protection in the event of unexpected illnesses or disabilities.
Pay attention to the political backdrop
It’s far too early to forecast the outcome of the 2024 election, however, we do know that without legislative action, many individual, business, and estate benefits included in the Tax Cuts and Jobs Act are set to expire on December 31, 2025. These expirations could have a major impact on your finances.
If key benefits sunset as scheduled:
- The top individual tax rate will increase from 37% to 39.6%. To reduce the impact:
- Accelerate salaries, bonuses, and other compensation from 2026 to 2025.
- Rebalance portfolios from taxable bonds to tax-exempt bonds.
- Consider adding life insurance products, which may become more attractive in 2026 onward.
- The qualified business income deduction of 20% will end. To reduce the impact:
- Since this is a noncash deduction, to increase the benefit, consider deferring cash deductions from 2025 to 2026 or accelerating revenues from 2026 to 2025.
- The estate tax exemption will be cut from $13.6 million to $6.5 million. To reduce the impact:
- Complete gift planning by 2025 using various types of trusts.
- Consider joint spousal gifts to increase lifetime exemptions.
Looking ahead further, opportunity zone capital gain deferrals end on December 31, 2026, so consider buying into a qualified opportunity zone fund no later than 2026.
How we can help
Looking ahead to 2024, we anticipate a return to economic normalcy and the end of recent extremes. This presents an important opportunity to plan for your future, factoring in anticipated tax changes.
At CLA, we work with our clients holistically, combining our wealth and tax knowledge to help plan for the future and reduce risk. Contact us to get started on planning opportunities to improve your financial future.