All I Want for Christmas is Some Easy Tax Planning!

Tax Planning can be made to be very complicated. Complex strategies to achieve dubious results are commonly seen on internet blogs and in tax planning newsletters. However, just for Christmas, I will give you some simple tax planning tips.

  • Contribute as much as you can into your retirement plan. (How often do you get to keep the money that gives you a tax deduction?)
  • DO NOT MATCH YOUR CAPITAL GAINS AGAINST CAPITAL LOSSES! (Why lose the low preferential capital gains tax rate?)
  • Real Estate and Business owners can charge expenses on their credit cards, take the deduction this year, and pay off the credit cards next year. (This also works for charitable contributions.)
  • If your capital gains tax rate is 0% you should consider selling your appreciated assets for gains that will be tax free. (You can reinvest in these assets 31 days later.)
  • Consider converting a traditional IRA into a ROTH IRA if 1) you are in a relatively low-income tax year with a marginal tax rate lower than your expected tax rate in retirement, or 2) your investments in the traditional IRA have been beaten down by the market. (ROTH investments should be those with a high probability of great appreciation.)

There you have it, five TIPS to keep the coal out of your stocking.

Happy Holidays!

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