A little advance planning can shave
hundreds - if not thousands - of dollars off of your tax bill this year. Here
are three effective tax-saving strategies you should consider adding to your financial
planning and wealth preservation plan:
Loss Harvesting
When you’ve
experienced capital losses on assets - such as stocks that have declined in
price - you can potentially use those losses to offset part or all of your
capital gains elsewhere. If your portfolio lacks capital gains, your investment
losses may be used to offset up to $3,000 in taxable income. These losses may
be carried forward to the next tax year, where they can offset more gains or
income. If you prefer to keep the losing stocks in your portfolio, you can
always buy them back - but you should wait at least 31 days to do so.
Otherwise, the transaction will be considered a wash sale, and you won’t be
allowed to claim the loss for the current tax year.
Flexible Spending Account
Check with your
employer to see if they offer a flexible spending account (FSA). This allows
you to set aside money for health, child, and dependent care expenses on a
pretax basis. When you withdraw money for these purposes, you incur no tax
liability, lowering your eventual tax bill. These contributions are also
exempt from payroll taxes for Social Security and Medicare. Failure to actually
use the funds in your FSA for their intended purpose can result in their
forfeiture. However, the IRS now permits up to $500 in qualifying expenses to
be carried forward into the following tax year. This option is only available
to you if your employer has chosen to allow it, or you’ll otherwise have until
the end of the year to spend down your FSA.
Home Ownership
The single
largest tax
benefit of home ownership is the deduction of mortgage interest payments. You
can deduct the interest you pay on a mortgage loan secured by a main or second
home, up to total mortgage balances of $1 million. Any points on your mortgage
are also tax-deductible, as is mortgage insurance. You’re entitled to claim
your property taxes, and you can also take deductions for numerous home
improvements related to energy efficiency. You must itemize in order to take
advantage of all these deductions, but they can save you a tremendous amount of
money - providing a big incentive to finally take the plunge and buy a home of
your own.
Minimizing your
tax burden requires a comprehensive certifiedfinancial planner by investment professionals. At Werba Rubin, we’re
committed to helping you achieve your goals by making the most of your
financial resources, and that includes avoiding the expense of unnecessary
taxes.
The information herein is general in nature
and should not be considered insurance, legal or tax advice. Please consult with an insurance legal or tax
professional for additional information on specific situations.
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