We know your “to-do” list seems to grow longer during this time of year, but it is incomplete until you get clear about the answers to these six tax questions before the end of the year:
Should I defer or accelerate income? If you anticipate being in a higher tax bracket next year, ask if you could pull more income into this year. Conversely, if you anticipate being in a lower tax bracket next year, ask if you could defer income until January. In addition, ask if it would benefit you to accelerate deductions by paying any income or property taxes not due until next year during this year.
Should I take any gains or losses this year? If you are currently in a low tax bracket and have made gains on your investments this year, you should ask if selling some investments to realize lower tax rates on those gains would be better than waiting to sell in the future.
Should I do a Roth conversion? If you have a traditional IRA and your retirement is years away, you may want to consider converting all or some of the assets to a Roth IRA. While you will pay taxes on those assets now, your earnings will grow tax-free in a Roth IRA.
Should I make any changes to my FSA or HSA for next year? If you have a flexible spending account or health savings account through your employer and anticipate higher medical expenses in the coming year, a good strategy may be to increase those funds so that you can use pretax money for your medical costs.
Should I be making charitable contributions? If you had excess income this year, you may want to think about reducing your tax burden through charitable contributions. Donating appreciated securities allows you to avoid the capital gains tax while still deducting the full value of the donation.
Should I be making gifts to family? Each year, you can give up to the IRS’ exclusion amount (or double if you are married and your spouse also gives) to as many individuals as you want without any gift tax implications. This allows you to help family members financially while removing taxable assets from your estate at the same time. It’s important that if you are going to be giving gifts, you call us because we want to make sure that the gifting strategy does not conflict with your long-term care planning and we also can set it up so those gifts are protected from bankruptcy, divorce or other creditors forever.
If you would like more information about tax-saving strategies or you would like some support getting clear on these answers for yourself, call our office at (612) 206-3701 or fill out our contact form today to schedule a time for us to sit down and talk.
Image courtesy of digitalart / FreeDigitalPhotos.net