| Are you paying too much in income taxes?
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| | sell before the year-end distributions to
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| Are you getting all the credits and
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| | avoid taxes on the upcoming dividend or
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| deductions you are entitled to? Here are
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| | capital gain. Also, you should allocate
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| 7 tips to help you minimize taxes and
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| | tax efficient investments to your taxable
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| keep more in your pocket:
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| | accounts and non-efficient investments to
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| 1. Participate in company retirement
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| | your retirement accounts, to reduce the
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| plans. Every dollar you contribute will
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| | tax you pay on interest, dividends and
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| reduce your taxable income and thus your
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| | capital gains.
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| income taxes. Similarly, enroll in your
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| | 6. If you're retired, plan your
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| company's flexible spending account. You
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| | retirement plan distributions carefully.
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| can set aside money for medical expenses
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| | If a retirement plan distribution will
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| and day care expenses. This money is
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| | push you into a higher tax bracket,
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| "use it or lose it" so make sure you
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| | consider taking money out of taxable
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| estimate well!
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| | investments to keep you in the lower tax
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| 2. Make sure you pay in enough taxes to
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| | bracket. Also, pay attention to the
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| avoid penalties. Uncle Sam charges
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| | 59-½ age limit. Withdrawals taken
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| interest and penalties if you don't pay
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| | before this age can result in penalties
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| in at least 90% of your current year
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| | in addition to income taxes.
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| taxes or 100% of last year's tax
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| | 7. Bunch your expenses. Certain
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| liability.
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| | expenses must exceed a minimum before you
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| 3. Buy a house. The mortgage interest
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| | can deduct them (medical expenses must
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| and real estate taxes are deductible, and
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| | exceed 7.5% of your adjusted gross income
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| may allow you to itemize other deductions
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| | and miscellaneous expenses such as tax
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| such as property taxes and charitable
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| | preparation fees must exceed 2% of your
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| donations.
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| | AGI). In order to deduct these expenses,
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| 4. Keep your house for at least two
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| | you may need to bunch these types of
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| years. One of the best tax breaks
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| | expenses into a single year to get above
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| available today is the home sale
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| | the minimum. To achieve this, you might
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| exclusion, which allows you to exclude up
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| | prepay medical and miscellaneous expenses
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| to $250,000 ($500,000 for joint filers)
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| | on December 31 to get above the minimum
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| of profit on the sale of your home from
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| | amount.
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| your income. However, you must have
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| | The most important thing is to be aware
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| owned and lived in your home for at least
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| | of the tax deductions and credits that
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| two years to qualify for the exclusion.
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| | apply to you and to plan for taxable
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| 5. Time your investment sales. If your
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| | events. And don't be afraid to ask for
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| income is higher than expected, sell some
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| | help. The benefits from consulting an
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| of your losers to reduce taxable income.
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| | experienced tax professional far outweigh
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| If you will be selling a mutual fund,
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| | the cost to hire that professional.
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