Time for a Tax Tune-Up
Right now is a great time to review several things so you can ensure a year that minimizes your taxes.
Here are a few strategies to start with, if you haven't done so already:
If you haven’t already, come in and see us for a review of your business and the tax implications that come with. That might include looking at whether or not you qualify for different tax treatment, taking advantage of all tax deductions possible, strategies if you operate on a cash basis, making sure you are up to date on tax law changes, and much more.
Retirement Contributions Review
The IRS classifies many retirement plans as “qualified,” meaning there are certain tax advantages to investing in them. Contributions made to a 401(k), SIMPLE or Simplified Employee Pension (SEP) plan are taken from your check pre-tax, meaning they are tax-deferred.
If, for example, you’re in the 32% combined income bracket, you pay $320 of income tax for every $1,000 earned and not contributed to the plan. Same goes for a traditional IRA if you qualify by income.
Health Savings Account
If you have a Health Savings Account and you don’t max contributions, you’re missing a good deal. HSA contributions, potential growth and withdrawals made for qualified medical expenses are tax-free. You can continue to take distributions for healthcare expenses from this triple-tax-free savings vehicle in retirement, too.
Retirement Distributions & Further Planning
Another area to re-visit: your retirement plan. If you are retired and drawing income from multiple sources, you’ll want to do so in the most tax-efficient way. As long as you keep in mind that distributions from qualified plans must begin by age 70 1/2, it often makes sense to first withdraw money from taxable investments and accounts in order to let money in qualified plans continue to potentially build tax-free.
Incidentally, a Roth IRA doesn’t require minimum distributions, so you can let that grow as long as you want. Every person has a different scenario, and we're here to help you plan for what's best for you.
Give us a call today for more information: (513) 576-1989.