Cheer up tax procrastinators! November is not
too late to regroup and refocus your tax planning efforts before year-end.
Start
by examining your withholdings and estimated tax payments to make sure you are
not heading toward a penalty. Remember to consider any life changes this year;
a change in marital status, dependents, or job can put your withholdings out of
whack. Are your gifts to charity or retirement plan contributions on track? If
you’ve been putting these off, there may still be time to get back on schedule.
Once
you know where you stand, there are several things you can do to refocus your
tax-saving efforts. For one, zero in on your taxable portfolio. Taxpayers with
capital gains this year should consider harvesting some capital losses to
offset those gains. This is particularly important with the new Medicare surtax
on net investment income, which is a tax of 3.8% on the lower of net investment
income or excess modified adjusted gross income above $200,000 for singles and
$250,000 for joint filers. Taxpayers with long-term appreciated stock might
consider donating some to charity to score a tax deduction equal to the stock’s
market value.
You
can also help reduce taxable income by what you put into your portfolio.
Tax-exempt municipal bonds pay interest that is excludable from taxable income
and the Medicare surtax. Also be aware that many mutual funds pay their annual
dividends in December, so before you purchase anything this time of the year,
check to determine the impact on your taxes. Another strategy is to put some of
your discretionary funds into your child’s education savings account or Section
529 account.
This
time of the year it’s all about lowering taxable income and raising deductions.
Taking some strategic steps now might pay big dividends come tax time.
Call us at (219)
769-3616 with your questions, or email them to tlynch@swartz-retson.com
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