Posted by James Financial Services Inc

Quick Tips for Effective Last-Minute Tax Planning

Quick Tips for Effective Last-Minute Tax Planning

With the end of February in sight, comes the beginning of March (a month when there is usually a race for tax investment and planning among those who have not done so during the year). Inadequate tax planning often forces people to pay more tax than they should if they had chosen the right investment strategies.

Here are some tips to help you make practical, last-minute tax planning decisions.

Defer Income

In general, the longer you wait to pay taxes, the better. Deferring income this year is a way to defer tax payments and reduce taxable income for the current year. For example, if you have a job and you are due to receive a bonus at the end of the year, you can ask your employer if the payment can be deferred to the following year.

While this strategy may cut taxes this year, deferred income can create tax problems in the coming year, especially if you are in a higher tax bracket.

    •    You will need to balance all of the current tax savings with the taxes you will have to pay in the future.

    •    However, if the priority is to cut taxes this year, the less income you have this year, the better.

Contribute to an IRA

Contributions to an Individual Retirement Account (IRA) may be tax-deductible in the year you make them. Although the different IRS rules regarding IRA contributions apply to different situations,

    •    In general, it is possible to deduct a full IRA contribution if occupational pension plans do not cover you and your spouse.

    •    If you and your partner are covered, your contribution may be limited, depending on the adjusted gross income.

For example, if you are in the upper 37% range and offer a deductible contribution of $ 6,000, the maximum amount for 2019, you can save up to $ 2,220 in taxes at the 2019 rates. Unlike most Savings strategies that ought to be in place before December 31, you can contribute to an IRA by the day of the tax return, usually April 15.

Take Capital Losses

If you lose money for capital investment, such as a stock, you can use that loss to reduce taxes. But you will first need to sell loss-making stocks, a process known as "realizing a loss."

    •    After you realize a loss, you can use it to offset any capital gains you have.

    •    If you have more capital losses than profits, the IRS will allow you to use up to $3,000 of the excess loss to offset ordinary taxable income.

    •    The IRS will reject the loss for tax purposes in the event of a wash sale. A wash sale occurs if you repurchase the same investment or an almost identical investment within 30 days before or after the tax loss.

In addition to offsetting capital gains, the assumption is that capital losses can eliminate a significant portion of the tax liability.

Group Costs

If you are a business owner, you can deduct a wide range of business costs. If you want to reduce your income tax this year, group your expenses as much as possible. Some common business tax strategies include:

    •    Make advance purchases related to the business at the end of the year rather than at the beginning.

    •    Pay bonuses to employees at the end of the year, not at the beginning of the year.

    •    Advance fees. For example, if you spend $ 10,000 a month on supplies, consider buying $ 25,000 at the end of the year to get you all the way through the next three months. When you make a massive purchase at the end of the year, you will receive a deduction from the current year for business expenses.

Save Taxes For Philanthropic Activities

Donations made for benevolent or charitable purposes may be required for tax deductions. This includes contributions to national aid funds, which can also be requested in section 80G. Some donations receive a 100% deduction, while others reach 50%, depending on why the contributions were made. If you have an additional corpus that you want to use for charitable purposes, this is the best time, because it will help you.

James Financial Services Inc
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