As you plan for the year ahead, you may be thinking about how the Internal Revenue Service’s adjustments to income tax brackets and standard deductions—which include a 5.4% bump in bracket thresholds—could affect your 2024 tax planning season. But even this year, as always, the best tax planning practices remain the same.

Connecting Today
You’ll likely experience a surge of questions from clients about the IRS adjustments, and this is a great opportunity to talk more with them about the big picture, explaining fundamentals while also keeping their core goals in mind. They might want to defer income for tax reduction or bunch itemized deductions into the current year to take a standard deduction the following year. Such moves can help them save money over the longer term.

The inflation-adjusted lifetime exemption—the amount of money or assets the IRS lets you give away over the course of your lifetime without having to pay the federal gift tax—will allow many clients to give more than ever before. The lifetime exemption is $13.61 million per individual in 2024, up from $12.92 million in 2023. You’ll also want to start conversations with clients about their options for philanthropy and grants as components of tax planning. Whether they’re giving to a charity, using an IRA to make direct contributions, or supporting a child with a 529 plan gift, they will be able to enjoy some tax benefits.

Ask your clients to connect with their CPAs to discuss tax-loss harvesting or the liquidation of assets according to their personal needs or market performance. They’ll also want to talk about positioning their portfolios to maximize the benefit of the lower tax rate on long-term capital gains investments and qualified dividends. They may further consider municipal bonds, which generally have no federal income tax. Although changes to income tax brackets happen every year, all of these strategies remain relevant.

Preparing For Tomorrow
When talking with your clients about tax planning in the near term, you can discuss what they should be keeping tabs on for the future. As we move into a presidential election year, tax chatter will pick up. It will be important to parse the political promises.

One thing people should be watching out for is the Internal Revenue Service’s beefed up enforcement. The agency is funding thousands of new agents and technology and deploying artificial intelligence and analytics solutions to improve oversight; it’s focusing specifically on matters that affect wealthy clients, including foreign tax reporting; digital assets; and pass-through entities such as limited liability companies, limited partnerships, general partnerships and S corporations (among other structures). While this may concern those with more aggressive tax strategies, it’s important to get ahead of it. Talking to your clients about the benefits and the importance of transparency can bring them some peace of mind.

Advisors should also be ready for the sunsetting of several provisions of the Tax Cuts and Jobs Act of 2017, since extending them would cost the federal government $3.3 trillion, according to the Committee for a Responsible Federal Budget, a think tank. Under the 2017 law, the estate tax exemption sunsets at the end of 2025, so financial advisors, tax professionals and their clients should prepare.

The law also currently gives taxpayers higher standardized deductions, a reduced estate tax, lower tax rates at all levels, as well as deductions on qualified business income, though it also places a $10,000 limit on state and local tax deductions. You should start preparing clients for how the upcoming changes will affect them.

Every year, tax brackets change to accommodate the changing market environment, which gives advisors this opportunity to revisit and have conversations with clients about other timely IRS rulings. When you’re fielding questions about 2024 changes, you should also start a “tax wellness checkup” in your end-of-year routine. That will show your clients that you have your finger on the pulse of the developments most pressing for them and their plans.

Steve Wittenberg is director of legacy planning at SEI.