6 Things You Want to Take Advantage of Now

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Now that summer is over and the holidays are right around the corner, this is one of the most important times of the year for assuring your financial success. As things ramp up before the holidays and the associated blur of activity that we all experience as the year draws to a close, I would encourage you to take a few minutes to look at your year to date, and take the time to make some decisions as to how you want to finish out your year. Taking the time could save you thousands or more!

1. What is your income so far this year? I like to contact my tax advisors each year at this time to see how much we have made and to project how the year will finish. By now you should have a pretty good handle on this. This way we can make adjustments to tax withholding, quarterly tax payments in order to avoid surprise tax bills and possible penalties. Also, if you have overpaid year to date, you can reduce or eliminate withholding for the rest of the year. This can really help with holiday shopping and those year-end expenses.

2. Do I need to open a retirement plan? If you want to open a retirement plan, other than an IRA or SEP IRA, you must do it before the end of the calendar year. You won’t be alone, and the IRS can get backed up in processing your request to establish a plan, so don’t wait too much longer. This would be for people who want to contribute higher amounts pretax than allowed by an IRA or SEP.

3. Review your portfolio. One of the more profitable things you can do to save on taxes, is to sell assets that have lost value. So many people won’t sell at a loss, instead hoping for the value to come back and frequently losing even more money! A great way to do this is to ask yourself, “would I buy this today?” If the answer is no, then you should sell right away. If the answer is yes, you may want to sell and recognize the loss, then buy back the asset, or a similar one. Harvesting your losses which can be used against recognized or future gains, can save big on taxes. NOTE: you have to make sure you understand and avoid the “wash sale” rules if you are going to do this!

4. Defer Income. Once you have determined where you stand income wise , then look at the tax tables and calculate your potential tax. If you are in one of the top brackets, and you think that you won’t be next year, then see if you can defer income. This can be done through a retirement plan as I mentioned in number 2, or you can establish a deferred compensation plan. Otherwise ask your employer to defer bonuses or your yearend paycheck into next year. If you are self-employed, you can delay billing or work with customers to pay in January.

5. Spend money. If you have planned investments in equipment or other business related expenses, do it now before year end. This can include prepayment for service providers, technology, inventory etc. Work with your tax counsel to determine both the types of expenses you can deduct, but also how much of the expense is deductible.

6. Give it away. If you are charitable or have causes that you like to support, consider donating before year end. If you have bigger potential tax liabilities, you may want to consider establishing a Charitable Remainder Trust or Donor advised fund.

These strategies allow you full control over the actual distribution of your donations and in some cases can actually be used to supplement current or retirement income!

Taking the time now to figure out what you might owe in taxes, and taking steps in order to reduce them, can reap big rewards for those who take the time. This is a partial list of opportunities that you might want to utilize. The key is doing it now while there is still time. Tax planning is a year round activity, but in the 4th quarter, it is even more important because your year is much clearer!

If you have questions about these or other strategies that could put money back into your pocket, contact us and we can see what can be done for you!
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