Around this time of year, it is always good to take a moment to consider tax saving strategies to help lower your income taxes. Changing legislation should not be the only reason to look for tax planning ideas; every year you should review your investments and finances.
Strategies to think about:
1. Investments – offsetting income and losses
Tax-loss Harvesting is a strategy used to help reduce taxes. Tax-loss Harvesting is when you sell an investment that has lost value. You then purchase a similar investment that will hopefully perform better. The loss on this investment sale is then used to reduce any realized gains from other investment sales. Be aware that you cannot sell and then buy the same asset.
2. Roth Conversions
When income is less steady, professionals may recommend Roth Conversions. The point of this is to convert from pre-taxed IRA into Roth IRA accounts. You will owe tax in the year of conversion; the benefit is that the Roth IRA grows tax free sheltering future earnings from income taxes. This means that when it comes time to use that Roth money, it can be withdrawn tax free.
3. Donations to Charities
Donations to charity can be another way to reduce your tax bill. The current standard deduction and limited state and local tax deduction limits the taxpayers that can take advantage of this deduction.
4. Changes in Legislation
Though there are a lot of ways to reduce taxes, it is advised to keep an eye on Congress before taking a final decision on the strategy you choose. Politics is like the wind; it is always changing and that can make it complex to understanding which strategy is best for you.
Contact an ICG Team member to discuss tax saving strategies suited for you. No one likes to pay taxes, so why not take advantage of these opportunities. Please contact The Innovative CPA Group by visiting our contact page or via our contact form.