By Chad Smith via Iris.xyz
As the holidays near, visions of new tax savings dance in our heads. But knowing how to spot them is what really matters. With all the new tax law changes, Will Holt joins us again to guide you through seven tax opportunities to take advantage of before year-end. Some of these tips can save you thousands of dollars, so listen in to see how you they may benefit your personal situation.
7 Tax Opportunities to Take Advantage Of
1. Which Direction are you Tax Harvesting? (Loss or Gain) – This hasn’t changed with the new tax law, but depending on your tax bracket, the percentage of tax you could pay has. If you’re facing a significant amount of capital gains or expect large capital gain distributions, the rough October performance could be a good opportunity for tax loss harvesting. This allows you to offset some of those gains and even go a step further, by using $3,000 of net losses against your income. It may seem counterintuitive to sell at a loss, but it allows you to offset higher potential taxes. Conversely, if you are in the new 12% federal tax bracket and lower, realizing more gains could be an opportunity instead, as these could be realized at 0%. But knowing your tax rate and all expected income is required. Discuss with a professional to know for sure.
2. Save more Pre-tax Retirement Contributions – Understanding how close you are to the max contributions of your retirement accounts, could present extra tax-advantaged savings at the end of the year. Maxing your 401K contribution is the first place to check. If you get a big year-end bonus, this could be a good trigger. Don’t forget your HSA, as this account provides a triple threat of tax savings (tax deduction, tax deferral, tax-free withdrawals).
3. Convert a Roth IRA? – With the new lower tax rates, this could be an nice opportunity to lower the inevitable tax you were going to pay on your IRA or 401(k) withdrawals.
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