Happy holidays – give yourself the gift of tax savings
As we head into the holiday season and New Years, it can pay huge dividends to spend a little time seeing if any year end moves can help you save a lot on taxes. (Flower Mound Tax Consultants: Gift of Tax Savings)
Build a sound plan
This simple step can help you get organized, see what your levers are and make smart decisions today and in future years. In a few minutes you can build a plan that lets you:
- See your net worth today and over time.
- Build a projection of what your retirement income will be and what drives it (such as Social Security, part time work, any pension, Required Minimum Distributions (RMDs).
- Project your expenses based on your current lifestyle, future moves, healthcare and taxes today and into the future.
- Think through Social Security and Medicare claiming strategies.
- Explore “What If” scenarios – for example what happens if you retire at 60 vs 65, go part time at 55, move abroad for a few years or do a series of Roth conversions to minimize taxes.
- Make smart choices around the things you can control (savings, investing, when you retire, where you live) and understanding your options to manage the risks you can’t control (inflation, market returns and longevity).
Maximize your company plan contributions
If you haven’t reached the contribution limits on retirement savings plans like 401ks and IRAs, then you should try to find a way to save the maximum here. Putting money into a retirement saving plan can have multiple benefits. You can:
- Defer paying taxes on the amount contributed.
- Build your retirement savings and compound those savings with future investment earnings.
- Boost the value of your savings if your employer makes 401(k) matching contributions.
The 2019 contribution limits are:
- $19,000 for 401ks, 403bs, 457s as well as Thrift Savings Plans. And, if you are 50 or older, the catch-up contribution is an additional $6,000. So, you can save a total of $25,000!
- $6,000 for IRAs. And, the catch-up contribution for people 50 or older is $1,000. So, you can save up to $7,000 with tax advantages.
Review health insurance and your health savings account
If you can contribute the maximum to a health savings account (HSA), it offers a triple tax benefit. The money is saved pre-tax, grows tax free and isn’t taxed when used.
Rebalance your investments
You may have put together an asset allocation strategy that seemed perfect for your financial situation before. But, as time goes by, your allocation will drift and should be rebalanced.
By rebalancing your investments, you can effectively minimize risk. Rebalancing essentially involves buying and selling portions of an investment portfolio to bring the weight of each asset class back to its original state. It helps to maintain the original asset-allocation strategy of the portfolio to help you stick to your investing plan.
Prepare charitable donations and planned giving.
Increasingly people are opening Donor Advised Funds. These allow you to immediately deduct the full amount of any contribution in a given year. Note: note any donation does need to be done by year end. Additionally assets grow tax free and at any time and you can recommend grants from your account to qualified charities.
Call Williams & Kunkel CPA today in Flower Mound at 972-446-1040 to have a chat and find out how you can save money on your taxes as a real estate professional.