All Year Round Strategies for Tax Planning as an Individual or Business

Planning is the key to successfully and legally reducing your tax liability. We go beyond tax compliance and proactively recommend tax saving strategies to maximize your after-tax income. We make it a priority to enhance our mastery of the current tax law, complex tax code, and new tax regulations through education. Businesses and individuals pay the lowest amount of taxes allowable by law because we continually look for ways to minimize your taxes throughout the year, not just at the end of the year. The difference between Tax Planning and Tax Preparation is: Tax Planning are actions you can take throughout the entire year prior to reduce your tax liability prior to filing your taxes and Tax Preparation is actually filing your tax return.

Here’s just a few of the Tax Saving Strategies we use:

1. Invest in municipal bonds to generate tax-free income.
Municipal bonds become more attractive on a relative tax basis for taxpayers who find themselves subject to the 3.8% surtax and who may also be subject to the highest (39.6%) marginal rate

2. Utilize strategies to reduce or avoid taxable income
Contributing to a retirement plan or IRA, funding a flexible spending account (FSA), or deferring compensation income can reduce adjusted gross income (AGI) and prevent a taxpayer from reaching key income thresholds that may result in a higher tax bill. Maximizing use of tax deductions such as charitable contributions or mortgage interest can offset income as well.

3. Consider Roth IRA/401(k) contributions or conversions
A thoughtful strategy utilizing Roth accounts can be an effective way to hedge against the direction of future tax rates in light of the longer-term federal budget deficit challenge. Younger investors or taxpayers in lower tax brackets should consider using Roth accounts to create a source of tax-free income in retirement.

4. Asset “location”: Allocate assets by tax status
In general, consider placing a larger percentage of your stock holdings outside of retirement accounts and a larger percentage of your fixed-income holdings inside retirement accounts.

5. Be mindful of irrevocable trusts and taxes
Because of the low income threshold ($12,400 for 2016), which will subject income retained within an irrevocable trust to the highest marginal tax rates and the 3.8% Medicare surtax, trustees may want to reconsider investment choices inside of the trust (municipal bonds, life insurance, etc.).

6. Plan for potential state estate taxes
While much attention is focused on the federal estate tax, certain residents need to know that many states have estate or inheritance taxes. There are a number of states that are “decoupled” from the federal estate tax system. This means the state applies different tax rates or exemption amounts. It is important to consult with an attorney on specific state law and potential options to mitigate state estate or inheritance taxes.

Remember, we work for you not for the IRS. Many of our clients save many times the fee in reduced tax liability through careful planning and legitimate tax strategies. We’re here to provide consultation to discuss these types of strategies to prepare for the risk of higher taxes in the future. Personal & business circumstances vary widely so it is critical to work with a team who has knowledge of your specific goals and situation.


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