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In many ways, tax season is similar to the New Year. How could that be? Tax season is full of anxiety and deadlines, whereas New Year’s is full of parties and fun. The similarity is that, like New Year’s, tax season is a time when many of us evaluate the last year and make resolutions for the year ahead. Make this the year you finally begin to map out your financial future and have a tax plan in place to start the new year off right. Here are a couple of tax strategies and tax breaks to consider.
Some examples of tax strategies include: selling securities to match capital gains against capital losses, implementing and contributing to a retirement plan, contributing to an IRA, and giving appreciated assets to charities or to other individuals.
Of course, there are many other ways to help you reduce your taxes, and not all of them are available or appropriate for everyone. While it is important to reduce your tax burden, moves made primarily for tax reasons may not be in your overall best interest. It is important to remain focused on your long-term strategies. For example, taxable investments may earn a better return than tax-free investments even after taxes, and some tax strategies may have a negative effect on other aspects of your financial picture.
Additionally, many tax breaks are only available to people with an adjusted gross income under a certain amount. Let’s say you could qualify for some of these valuable tax deductions and credits — but your income is a little too high.
It may make sense to lower it before the end of the year. The first step in this process is to make a projection of your income for next year, as well as your expected deductions and tax credits. With the projection in hand, we can see how close you are to claiming various tax breaks — and whether or not you should take some aggressive steps to lower your adjusted gross income for the year. This is a smart move for small business owners who have some control over when they receive income.
Examples of Income-Sensitive Tax Breaks:
If you have questions about which tax strategies or tax breaks might be appropriate for you, please contact us using the form below.