Keep more of those Greenbacks in your pocket: 7 Tips to Make Taxes less Taxing

Keep more of those Greenbacks in your pocket: 7 Tips to Make Taxes less Taxing

By Ben  Sadtler

It’s not how much money you make, but how much money you keep - Robert Kiyosaki

Despite the fact that we are neither CPAs, nor IRS agents, nor Wesley Snipes, we find that taxes play a crucial role in our line of work (something about “death and taxes” comes to mind). Regardless of political affiliations I think we can all agree that, if a law or regulation has been enacted to help us reduce our tax bill, we should take advantage of it or at least be aware of it.  With that in mind, here are a few things you can review right now to help you keep more greenbacks in your pocket.

1. Tax-loss harvesting

As we have discussed before, tax-loss harvesting is the process of using capital losses within your investment portfolio to offset capital gains or income on your tax return. Although nobody likes to lose money, capital losses can prove valuable in reducing your tax bill. We try hard to monitor capital gains and losses – make sure you let us know if you have any loss carry-forwards that we should know about.

2. Check your withholding elections

If you are a W-2 employee and you received a refund last April, your withholding elections may be too high. Although it’s always a pleasant surprise to receive a refund, your excess tax dollars are essentially an interest-free loan to the IRS until they pay you back. Isn’t there something better you could do with them?

3. Review retirement plan contributions

This is a two-parter. For those with a 401(k) or 403(b) plan, does your company offer a matching program. If yes, are you taking full advantage of it? If not, you’re leaving free money on the table. It may be unpleasant to increase your contributions (thus decreasing your paycheck), but your spending habits will quickly adjust. For those without a company-sponsored retirement plan, are you participating in an IRA, Roth IRA, SEP IRA, or Solo 401(k)? Not only do contributions to these plans grow tax-deferred, but they also reduce your taxable income in the year you make the contribution.

4. Gifting

If you’re feeling generous, you may gift $14,000 of cash, securities, or real estate to your children, grandchildren, best friend, or a complete stranger on an annual basis (1/1 – 12/31) without incurring any taxes. If you are married, you and your spouse may each give $14,000 (total $28,000) to any single person or entity. This can help to reduce the size of your taxable estate, if that is an area of concern. It is important to note that gifts to charitable organizations have different rules.

5. Charitable Gifting

If you want your charitable donations to be recognized on your 2015 tax return, the donation must be received by the charity on or before December 31st (not April 15th). Typically, you may deduct the entirety of your charitable contribution, up to 50% of your gross income. Deductible donations must be made to qualified organizations. Most groups classified under Section 501(c) of the tax code are considered “qualified,” but it makes sense to double-check.

6. Health insurance

Whether or not you agree with it, the Affordable Care Act is here to stay for the foreseeable future. The open enrollment period for most health insurance plans typically begins in October or November. Review your coverages, premiums, and benefits to ensure they meet your needs. Also, it is rumored that your premiums may increase substantially for 2016, so be prepared for that.

7. Life-changing events?

Have you, your spouse, or your family experienced any life-changing events this past year? Births, deaths, marriages, divorces, new jobs, and new homes are just some examples of the various events that could have a major effect on your 2015 tax return.

Of course, we recommend discussing these tips and many others with your accountant or tax advisor. While our tax expertise is limited, we are also happy to discuss these matters with you to the extent our knowledge permits. 

Securities offered through Level Four Financial, LLC, a registered broker dealer and member of FINRA/SIPC. Advisory services are offered through Level Four Advisory Services, LLC, an SEC-registered investment advisor. Accounts carried by Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC. Neither Level Four Financial, LLC nor Level Four Advisory Services, LLC offer tax or legal advice. Please contact your tax or legal professional for specific information regarding your individual situation.
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