Resources: Proactive Tax Savings Tips

Now Is The Time To Be Proactive With Your Taxes

Now is the best time to think about tax savings and tax planning. By April when most people ask how to lower their tax bill, it is often too late to do anything. Preparing tax returns is like reporting the news, you’re just stating what happened. There is not a lot you can do reduce taxes once the year is over. Tax savings is best done proactively through tax planning and implementing strategies during the year.

Below are my most recommended tax savings opportunities. Some may apply to you, some may not, but I urge you to take the time to read through them. If you have questions about them or anything else, please let me know. I would be happy to schedule some time to talk with you about your individual situation, questions, or concerns.

Tax Saving Opportunities to Act-On Now:

General:

Contribute to a qualified 529 savings plan
Fund your HSA and/or FSA
Make January’s mortgage or real estate tax payment in December to get the deduction early
Donate to charity, including non-cash donations such as Good Will
Avoid taxes on an RMD with a charitable donation
Prepay college tuition for the spring semester
Make an extra payment on your student loans
Prepay personal vehicle excise taxes

Retirement:

Contribute to a Traditional IRA or Roth IRA
Make a back door Roth conversion
Maximize your 401k or 403b at work
Contribute to a Self-Employed Pension plan, or solo 401k (if you qualify)

Business:

Invest in the business to lower taxable income; bonus deprecation and section 179 were extended with the Tax Cuts and Jobs Act
Prepay expenses early to get the deduction this year
Extend client’s payment terms to push revenues into next year
Keep a mileage log to take advantage of the standard mileage deduction
Contribute to your SEP plan
Pay estimated payments to avoid small penalties
Consider an S Corp election

Rental Property:

Invest in the property to lower taxable income
Make January’s mortgage or real estate tax payment in December to get the deduction early
Same with condo fees, insurance premiums, or other recurring expenses
Make sure the unit is available for rent (even if not rented) for as much of the year as possible
If it’s a vacation property, do not use it for more than 14 days of the year
Consider a section 1031 exchange before selling

Investments:

Hold securities for greater than one year, when possible
Harvest your capital losses if your income is higher than normal this year
Sell long term positions if your income is lower than normal this year
Invest in tax-exempt municipal bonds
Do not sell to cover ISOs or ESPPS from your employer; they are taxed as short term
Plan the exercise & sale of ISOs to avoid AMT
File an 83(b) elections when allowed for new company shares