Tax Management

You could be paying too much...

You could be paying too much...

Understanding tax strategies and managing your tax bill should be part of any sound financial approach. Some taxes can be deferred, and others can be managed through tax-efficient investing.

With careful and consistent preparation, you may be able to manage the impact of taxes and keep more of what you earn.

GUIDE TO TAX SAVINGS

We will use multiple ways to help you save:


USE TAX FREE AND TAX DEFERRED INVESTMENTS

  • Interest on the general obligations of state governments(municipal bonds) are free of federal income tax.  In most states you also get a pass on state income tax if you buy bonds from your home state.

USE YOUR IRA TO MAKE QUALIFIED CHARITABLE DISTRIBUTIONS (QCD)

  • When you reach the age of 70 ½ and you have a traditional IRA, the IRS generally requires you to take a required minimum distribution (RMD) from it, even if you don’t necessarily need the money. If you are taking an RMD from your IRA (not an inherited IRA), then there’s a unique giving opportunity that can maximize your impact of giving as well as give you a potential tax benefit.

REAP THE BENEFITS OF TAX-LOSS HARVESTING

  • Did you know you can possibly turn your losses into a benefit to you? Tax-loss harvesting is a strategy in which certain investment assets are sold at a loss to reduce your realized capital gains during the year, thereby reducing your tax liability. You can also use tax-loss harvesting to offset up to $3,000 in non-investment income (e.g., wages, pension income, Social Security income, etc.).

FULLY FUND EMPLOYER-SPONSORED RETIREMENT PLANS

  • If you are not maxed out on your plan contributions (401k, 403b or 457 plans), the deadline is December 31st of each year.  For 2019, the contribution limits were raised to $19,000 per year, and if you are 50 or older you can contribute an extra catch-up contribution limit of $6,000/year bringing your total contributions allowed to $25,000 for 2019.  Keep in mind that contributions related to self-employed retirement plans can be subject to different deadlines.

CONSIDER FOURTH QUARTER ESTIMATED TAX PAYMENTS

  • Federal and state fourth quarter estimated tax payments, for the previous year, are traditionally due on January 15. In the past, worrying about whether to make state estimated tax payments early was an issue if you faced the Alternative Minimum Tax (AMT) or if you were concerned about maximizing the deduction for those not facing AMT. With taxes for itemized deductions now being limited to $10,000 per year, this will be less relevant for most people; however it still may be something to consider.

DON’T FORGET ABOUT REQUIRED MINIMUM DISTRIBUTIONS (RMD)

  • You generally must start taking withdrawals (required minimum distributions) from your IRA, SEP IRA, Simple IRA, or retirement plan account when you reach age 70 ½. If you have a retirement plan account like a 401k, you can postpone taking distributions if you are still working. If you own 5% or more of the business sponsoring the plan, however, you must take distributions at 70 ½.

SEE IF A ROTH CONVERSION MAKES SENSE FOR YOU

  • One of the most common tax-advantaged retirement accounts is the Roth IRA. These can be a great way to save if your tax rate in retirement will be similar or higher than your current tax rate. You don’t get a tax deduction when you contribute, but your withdrawals in retirement are tax free (though you should keep in mind that if you’re already in the 24% or higher federal tax bracket, you probably can’t – and probably shouldn’t – contribute to a Roth).

GIFT TO YOUR LOVED ONES

  • The gift tax exclusion this year (2019) means you can gift up to $15,000 to as many people as you wish per year, free of gift taxes. Your spouse can also use this exclusion which means you can essentially give up to $30,000 per recipient.

DONATE LONG-TERM APPRECIATED SECURITIES 

  • One way you can take advantage of an often overlooked charitable-giving tax break is by donating appreciated assets instead of giving cash or writing checks to charities.