Planning ahead is key to navigating the complexities of the tax landscape. That’s why we are pleased to provide you with our 2025 Tax Reference Sheet, a convenient resource that offers quick access to important tax-related data points for the year ahead.

Whether you’re looking for updated tax brackets, contribution limits, or other essential figures, this guide is here to help you stay informed. Should you have any questions or need further information, our dedicated team of tax professionals is just a call or email away. Their contact details can be found at the bottom of the sheet.

As always, we are here to help and are committed to supporting you with the insights and resources you need.

Succession and exit planning are essential for transforming your business into a valuable asset that aligns with and supports your broader life goals. However, navigating these complex processes can feel overwhelming without expert guidance.

To help, TFO Family Office Partners is thrilled to host a webinar featuring John Chionchio, Partner at WealthPoint Business Advisory Services. This live event, hosted by TFO Family Wealth Strategist and Partner Damon Miller, will provide valuable insights into developing and executing effective succession and exit strategies.

Here’s what you’ll gain from attending the webinar:

• Understand the why, how, and what of outcome-driven succession and exit planning:
  • Preparing your business as an asset
  • Exploring 10 monetization strategies and their impacts on desired outcomes, including:
    • ESOPs
    • 301 redemptions
    • Owner/investor models
    • Recaps
    • Hybrid solutions
    • And more
  • The keys to making great decisions
  • Little known secrets of successful execution
• Common financial industry challenges in delivering value to business owners through exit planning.
• How finding and partnering with a specialist provides optimal outcomes.
• The importance of true collaboration in achieving optimal outcomes.
• What to do right now to get succession and exit right.

Important steps to optimize your finances and minimize your taxes before the new year

As 2024 draws to a close, it’s important to think about your year-end planning. This is the perfect time to take control of your taxes and find ways to lower what you owe the IRS. While your TFO engagement team can help you with specific recommendations, here’s a simple checklist of potential actions to consider before December 31.

We’re always here to help you! If you have any questions, please feel free to reach out to a member of your TFO engagement team.  You can download the printable checklist by clicking the button below.

By Chuck Carroll, CFA, CAIA
Chief Investment Officer
TFO Family Office Partners

Tonight, our country will focus on our electoral process of determining our next President, and other legislators who will shape our country for the next 2-4 years. Elections have been a foundational and fundamental element of our democracy for almost 250 years. They can also be polarizing and stressful, as those with strong opinions find themselves at odds with fellow Americans who hold opposing views.

It’s natural for those passionate about a candidate or a political party to perceive a connection between election results and the future performance of the stock market. After all, each of us hopes that our preferred candidate wins, and we all hope the stock market goes up. So, it feels natural to associate the two outcomes in our minds. But if we look more deeply at history, we see that the stock market hasn’t shown much preference for one political party or the other over the past 98 years.

By Chuck Carroll, CFA, CAIA
Chief Investment Officer
TFO Family Office Partners

At its September 17-18 meeting, the Federal Reserve (“the Fed”) is expected to cut the federal funds rate. The Fed Funds rate is the interest rate at which banks make overnight loans to one another. It’s a tool used by the Fed to control the money supply in the U.S. economy and regulate the economy. A September rate cut has been talked about in the media for some time, with many outlets providing forecasts about what it will mean to the financial markets. Below we will discuss the elements of your financial world that you should expect to change if the Fed cuts rates, and others where a Fed rate cut will likely be less impactful.

Likely direct impacts of a Fed Funds rate cut
• Yields on money market funds, CDs and bank savings accounts will likely go down slightly. The yields on these accounts tend to be tightly correlated with the Fed Funds rate.
• Interest rates on adjustable-rate loans such as adjustable-rate mortgages, credit card debt, margin loans and new student loans will likely decrease slightly.

Impacts of a Fed cut that are less clear
• The short-term direction of bond yields and prices.
• The short-term direction of stock prices.

What about the bond market?
It’s important to remember that the Fed only controls the interest rate at which banks lend to one another. The Fed does not directly control the yields on intermediate-term bonds. Bond yields (and their prices) are driven by investors’ collective expectations about the future: Future inflation, future Fed actions, future risk tolerance of investors, etc.

To see how uncorrelated bond yields are from the actions of the Fed, all we have to do is look at the last 14+ months. The last time the Fed took any action was when it raised the Fed Funds rate on July 26, 2023. Since then, it has held the Fed Funds rate constant at 5.5%. But the yield of the 10-year Treasury bond has gyrated dramatically over that period, rising to almost 5% during the fall of 2023, then falling to its current mid-3% level.

Because bond yields are based on expectations, the chart above would seem to tell us that during the past 12 months investors have been incorporating their expectations of a future Fed rate cut into bond yields. As a result, Wednesday’s widely anticipated Fed rate cut is unlikely to have a direct impact on bond yields and prices.

What about the stock market?
In recent weeks, there seems to have been a flurry of media articles implying that a Fed rate cut will bring good things to the stock market. But history tells us that such a relationship isn’t as clear as the media would like us to believe.

Until the late 1980s, the Fed didn’t even use a Fed Funds rate target to set interest rate policy, instead focusing the level on nonborrowed reserves in the financial system and/or using open market operations (buying and selling of securities) to manage the U.S. economy1. Until 1994 the Fed didn’t even issue a “policy statement” describing its Fed Funds actions, much less hold press conferences to discuss its views of the economy and the rationale for its decisions2. The whole concept of “Fed watching” is only three decades old.

What can we tell from the past 30 years of transparent Fed actions? Since 1994, the Fed has cut the Fed Funds rate 30 times. Were those cuts signals that stock prices were going to rise? To answer that question, we looked at global stock market performance over the 12 months starting the 1St of the month after a Fed cut. The performance of the global stock market in the 12 months following those 30 cuts is shown below.

The chart above is likely to disappoint investors who want to believe that Fed actions influence near-term stock market performance. Stock market returns over the 12 months following a rate cut have covered an extremely wide range, from 55% in 2020 to -43% in 2008, and on average have been negative: -2.4%.

As we see in the chart above, rate cuts tend to come in bunches. What if we look at only the first rate cut in a cycle, like Wednesday’s cut would be?

There have only been five such “first cuts” in the past 30 years:

We see that “first” rate cuts have occurred in response to a variety of economic environments, and the performance of the global stock market following those cuts has also varied dramatically. To us, this is yet another piece of evidence that a Fed rate cut doesn’t mean near-term stock market gains (or losses) are a sure thing.

Summary
While a cut in the Fed Funds rate will likely result in lower yields on money market vehicles and lower debt costs on adjustable-rate debt, its potential impact on stock and bond prices isn’t clear.

If the markets do move dramatically on Wednesday (or at any time before or after), it will likely be because investors are digesting new, unexpected information. But trying to forecast what that latest information will be, and how investors will react to it, is incredibly difficult. As a result, we caution against making near-term predictions about the markets, and/or making specific decisions solely because the Fed’s actions. Rather, we encourage you to continue to have a long-term mindset and avoid letting Fed’s actions be a distraction to you.

As always, please feel free to connect with any member of your TFO team if you have questions.

Written by Chuck Carroll, TFO Family Officer Partners Chief Investment Officer

The holiday season is officially upon us, and with it comes our annual opportunity to gather with family and friends and share joy with those we love. If you’re anything like me, those family gatherings also provide a great opportunity to smile and raise a glass to fond memories and funny stories about loved ones who are no longer with us.

One of my most vivid memories of my late father was his passion for photography. A number-crunching, business-advising Certified Public Accountant by day, on the weekends (at least those he wasn’t working) he was passionate about all things photographic. During my youth–the late 1970s and 1980s– technology hadn’t yet blessed photographers with the digitalization and miniaturization that we take for granted in today’s mobile phones and digital cameras. As a result, serious photo hobbyists could easily acquire a closet full of camera bodies, various-sized lenses, light meters, and other related paraphernalia. When we traveled on family vacations, my father would pack a separate carry-on bag (think extra-large padded duffel bag) of camera gear, which never left his side. To this day, my mom just shakes her head and sighs when she describes us weaving through a crowded airport, she, my sister, and I carrying the bulk of our family luggage because no one other than Dad was allowed to handle “the bag.”

When I would ask him (as I think I did on every trip) why just one camera and one lens wasn’t enough, his response was always the same: “You never know.” I’ve since come to appreciate that phrase, because the photos in our digital frame that we cherish the most aren’t the meticulously posed, digitally enhanced images of family photo shoots. While we appreciate those, the photos that really make us smile are the candid snapshots taken in the waves, at a sporting event, or just doing something silly in our own backyard. The wonderful images that only exist because the person taking the picture had the foresight to think, “you never know.”

In the financial markets, the month of November was analogous to one of those memorable candid snapshots. November didn’t provide any dramatic newsworthy events to anchor in our memory: No great advance in treating a life-threatening human condition, no peaceful ending to a worrisome military conflict, no global economic boom. In fact, earlier this Fall many market pundits had been downright pessimistic about the impact that lingering inflation, falling commercial real estate prices and a host of other concerns might have on the global stock market.

But yet, in the face of that pessimism and without an obvious catalyst, the global stock market turned in one of its most impressive months in history. The 9.3% return achieved by the market in November was the best monthly return since 2020¹ and ranked in the top 3% of the 1,175 months of market history going back to 1926¹.

What was more surprising to many investors in the month of November was that the US bond market gave us a surprise that one-upped the stock markets. At the end of October, the US bond market had suffered through its worst three-year period history, falling over 15% during that time¹. But investors betting on a continued decline in bond prices were surprised to see the bond market quickly reverse and post a 4.6% return in November, its best month since “Back to the Future” hit the theaters and “The Cosby Show” ruled the TV ratings¹. In fact, November’s bond market performance was the 8th best monthly return in the past 1,175 months¹.

While some pessimists might try to downplay November’s returns as just a meaningless one-month blip in a downward trend, the long-term impact on an investor who chose to be out of the market, and thus missed the significant one-month returns described above, could be quite dramatic. For example, a hypothetical investor who chose the comfort of their savings account over a 60/40 portfolio of stock and bonds didn’t just miss out on the unusually strong returns that the market provided in November. The opportunity cost of missing just those 31 days, when compounded over a multi-year or multi-decade time horizon, could potentially double or triple the initial amount.

Any great photographer knows that being prepared for life’s unpredictability can help to capture once-in-a-generation moments.  Staying fully invested in markets, even when recent results have been disappointing and the news seems bleak, can do the same thing for your wealth. After all, you never know.

As we head for the year’s home stretch, there is a host of planning items you should consider as well as some general information you should be aware of for the coming year.

PLANNING ITEMS

Wages and Payroll

Depending on the benefits that are offered through your employer, you may have access to an FSA, HSA, or both. Below are items to be aware of with each, be sure to check your benefits or consult your employer or your benefits handbook to determine what you have available.

Flexible Spending Account (“FSA”)

Look to use up your “FSA” funds before year-end. Depending on the plan, employers allow a carryover from 2023 to 2024 of “FSA” funds of up to $610. Some plans also include a 2 ½ month “grace period” that extends the balance of your “FSA” into 2024. Employers are not required to offer these extensions. Please check with your employer to determine if your “FSA” includes either of these benefits.

Goal – To use and not lose the money you contributed to your “FSA.”

Health Savings Account (“HSA”)

Maximize your pre-tax “HSA” contributions. $7,750 is the maximum you can contribute to your “HSA” in 2023 for family coverage. $3,850 is the maximum amount you can contribute for self-only coverage.

Goal – To maximize pre-tax savings and save for future healthcare needs. You have until 4/15/2024 to make these contributions effective for the 2023 tax year if you are self-funding. If your HSA is funded via your employer, funding is typically limited to the calendar year. The statutory deadline for contributing to your HSA is through the un-extended deadline for filing your income tax return. Normally, that’s April 15th after the close of the tax year.

There is also a $1,000 catch-up contribution for individuals aged 55 or older.

401(k) Contributions

Maximize contributions to 401(k) plans of $22,500 and $30,000 if age 50 and older.

Goal – To maximize pre-tax savings and save for retirement.

Also, the IRS just announced the 2024 contribution limits for qualified retirement plans. The employee contribution limit rises from $22,500 to $23,000. The catch-up contribution for individuals 50 or older stays the same as this past year at $7,500.

The defined contribution limit, which is the combined total between employee and employer contributions climbs to $69,000 which is an increase of $3,000. The employee compensation limit which restricts the amount of compensation eligible for calculating contributions is going up by $15,000 to $345,000.

Year-End Tax Payments

If, while doing year-end planning, it is determined you have underpaid tax throughout the year, you can change your withholding for your last pay period or two.

Goal – To avoid underpayment penalties. Withholding is deemed to be paid evenly throughout the year, so by withholding a larger amount at year-end, you might be able to reduce or eliminate the underpayment penalty.

INCOME AND PORTFOLIO PLANNING

Roth Conversions

If you/your household is in a lower tax bracket for 2023 (due to business loss or other known changes) and you have an IRA(s), you may want to consider converting a portion or all of the IRA to a Roth IRA. Individuals should consult their tax advisor regarding their specific situation.

Goal – To pay less tax on the amount converted today vs. what you might have to pay someday in the future when you take it out. Roth accounts grow tax-free.

Tax Loss Harvesting

If you have securities/stocks in a loss position close to year-end, consider selling them to realize the capital loss.

Goal – To use the capital losses to offset capital gains and if they are not fully used, carry forward indefinitely.

Note – To avoid complicated tax rules (“wash sales”), it may be recommended that you reinvest the proceeds in something similar to the security/stock you sold, but not the same one.

Trust Distributions

Trusts reach their highest tax bracket of 37% at $14,451 of taxable income. Distributions from a tax-paying Trust shift income from the Trust to the Beneficiary. If you are in a lower tax bracket, you could reduce your overall taxes paid between you and the Trust.

Goal – Pay fewer tax dollars between you and a trust for your benefit. Distributions through March 6, 2024, can be counted for 2023 if elected.

SCHEDULE A – MAXIMIZING ITEMIZED DEDUCTIONS

Bunch Medical Expenses

If you and your family have incurred a large number of medical expenses this year, make sure the majority, if not all, are paid before year-end.

Goal – If itemizing, this would maximize the amount you could deduct on your return.

January’s Mortgage Payment

Make January’s mortgage payment at the end of December.

Goal – If itemizing, this would move more deductible mortgage interest to the current year.

Investment Interest Expense

At year-end, if you are looking to pay down a line of credit or loan, make sure you are first paying off any accrued deductible interest. For example, accrued interest on credit lines or margin loans used for business or investment purposes. Any additional paydowns should be applied to the line of credit that has been used for personal purposes. Your Certified Public Accountant (CPA) or financial advisor should be able to help you with that determination.

Goal – To maximize the tax deduction for interest paid.

Charitable Giving and Standard Deduction Planning

If you donate to charities but notice on your tax returns you are not itemizing, you might want to consider “Charitable Stacking.” You can discuss this strategy more with your tax adviser.

Goal – Optimize your giving while utilizing the increased standard deduction.

Cash Charitable Contributions

Contributions made to public charities are deductible up to 50% of AGI. This limit is increased to 60% of AGI for cash gifts and 30% of AGI for appreciated non-cash assets held more than one year. Contributions more than these deduction limits may be carried over up to five subsequent tax years.

Goal – To eliminate income tax liability in 2023 through cash gifts to charities.

Consider a Donor-Advised Fund (“DAF”)

A “DAF” is a charitable investment account. From this account, you can direct the funds to go to the majority of public charities. If you donate cash to the donor-advised fund, you get a deduction of up to 60% of adjusted gross income. If you donate appreciated securities to the donor-advised fund, you can deduct up to 30% of adjusted gross income.

Goal – Help the charity(s) of your choice, lower income taxes in a high-income year, and excess contributions carry forward five years.

Note – Talk to your adviser about possibly giving other appreciated assets like real estate, partnership interests, or private stock.

Non-Cash Property – Need an Appraisal?

If you have made a contribution of non-cash property worth $5,000 or more, you will need a qualified appraisal (Does not apply to stock/securities that are valued on an ongoing basis).

Goal – Properly document large non-cash gifts so they will be deductible on your tax return.

OTHER ITEMS

Fund 529 Plans Before Year-End

If considering a 529 plan contribution in the coming months, make it before year-end. There are a number of states which allow a deduction or credit for contributions. Growth in these funds is also tax-free.

Goal – Save for educational expenses and get a state tax benefit.

As always, if you have any questions relating to the above year-end considerations, please contact your TFO Family Office Partners adviser. We would be happy to help.