While it’s true we cannot avoid death or taxes, it’s safe to say we all want to live as long as we can and pay as little tax as possible while we’re still here. The good news: There are several ways to make sure you aren’t parting with more money than necessary when it comes to tax time.
Max Out Your 401k
As you know, money contributed to a 401k is excluded from your taxable income, thereby lowering your tax bill. Participants ages 49 and below can contribute up to $18,000 to employer-based plans each year (that’s $500 more than 2014). Workers 50 and older are eligible for an additional $6,000 in catch-up contributions. While you are reviewing your contributions, consider increasing the percentage of your income you are allocating to your 401k; if your raise goes into affect at the start of the year, ratchet up your savings at the same time so you won’t feel the hit.
Harvest Tax Losses
Tax-loss harvesting involves selling investments at a loss to offset capital gains. Harvesting tax losses is particularly important for people who own mutual funds in taxable accounts, especially in 2015, when the markets are turbulent and nervous investors start to withdraw money from these accounts. Having the ability to sell securities at a loss will help eliminate the tax burden of those withdrawals.
Grab Every Available Deduction
If you’re worried you’ll end up in a higher tax bracket this year, make sure you expense as much as you can, particularly if you are a small business owner. This includes making sure all of your business bills are paid with checks postmarked before December 31st.
Donate Stocks Instead of Cash
When you go to donate to your favorite charity, consider donating appreciated stocks instead of cash. You and your cause will benefit from the stocks current value, not just what you paid for it initially. This is a much better option than cashing out the stock, paying the tax, and then donating whatever funds are left.
It’s a good idea to consider both this year and next year when deciding how to handle income, expenses, and deductions. For instance, it may be a good idea to make an extra mortgage payment in a year that may see more income or you may want to consider making a charitable donation in the year it makes the greatest tax-saving impact.
The Wealth Management Team at Security National Bank has several more tips to help you save on taxes and make the most of your money. Call and set up your appointment today to see how we can help.Back to Articles