Maximize your Returns:
Our Tax Review Checklist

Each year as you file your tax returns ask yourself this simple question “are you maximizing the best tax strategies to retain your income?”. If you answered no, rest assured our tax review checklist can help guide you to make the most of your tax results. To fully maximize your potential distributions for future years, rely on our certified financial experts at Park Place Financial.

Maximize Your Retirement Plan Contributions

It is important to understand tax implications when contributing to your retirement accounts. The decision of paying taxes now or later should not be an emotional one. Rather, prioritizing between Traditional and Roth IRA accounts should be done with careful consideration of your anticipated tax-bracket at retirement.

Beware Harvesting Short-Term Capital Gains

We all know the old adage “buy low, sell high”. But, beware what you are selling. When you sell an investment for more than your original purchase price, it is considered a capital gain. There are long-term and short-term capital gains, and each is taxed differently. If you have held a security for less than 12 months, and sell it for a profit, this is a short-term capital gain that will be taxed at the same rate as your ordinary income. On the other hand, if you have held a security for longer than 12 months, and sell it for a profit, this will be taxed at a preferred capital gains rate. Depending on your income tax bracket, this may be as little as 0% and a maximum of 20%.

Identify Opportunities for Capital Loss Harvesting

Tax-loss harvesting is the opposite. It requires selling securities at a loss and not repurchasing that stock for at least 30 days. You may then take a net deduction of up to $3,000.

Capital losses can also strategically be used to offset capital gains to reduce the amount you owe in taxes. If you sell one holding at a gain of $15,000 and another at a loss of $10,000, your net gain, and the amount you must pay taxes on, is $5,000.

Explore Roth Conversion Opportunities

Every year individuals have the opportunity to convert that year’s IRA balance into a ROTH IRA. Calculating and determining the optimum amount to be converted into a ROTH IRA each year is an example of the proactive tax planning we provide. Doing so allows owners of the accounts to reduce tax liabilities from the original conversion.

Review RMD Timing

People often delay withdrawing money from retirement accounts to prolong how long they may last when they need them. However, the IRS requires people to take minimum distributions by 70 and a half to 72 years old. Failure to do so may lead to a 50% penalty on the amount you should have withdrawn. Many smart retirees wait until close to year-end to withdraw this money to take advantage of compound growth.

Consider Charitable Gifts

If you have a high income and wish to greatly reduce your tax liability, charitable gifts may help make this possible. Supporting charities can also have a rejuvenating effect on the communities they serve. If you are a public figure or own a business, it may also provide good publicity for the brand.

Maximize Annual Exclusion Gifts

The IRS determines the gift exclusion per each individual receiving gifts from a donor. This encourages donors to maximize annual exclusion gifts by spreading out how many people receive gifts each year. Note that not all gifts are eligible. When the gifts are not cash-based, you may also need to calculate the fair market value for tax exclusion purposes.

Review Use of 529 Plans

If you plan to go back to school or wish to support a family member who has college plans on the horizon, 529 plans are incredibly helpful. In fact, beneficiaries may use the plan to cover school expenses even before college, such as tuition for private high school. These plans also make great tax-planning vehicles for most financial situations.

Discuss Tax Bracket Management

If you own a business, earn an otherwise variable income or you are married, you may need to discuss how to remain within a certain tax bracket. Many of the checklist items above may already assist you with remaining below a certain tax threshold. Even so, some people may forego a portion of income altogether or accept other compensation in place of cash.

Discuss Potential Deduction Timing

Your deduction timing may come down to a number of factors. Due to this, what worked last year may not be appropriate for this year, especially in light of current socio-economic conditions. Ideally, however, most people try to take as many deductions in the current year as possible. Then, they attempt to roll as many as possible into the coming year.

The more money you make and the more income streams you have, the more often you should review your tax strategies. Our tax review checklist can help you simplify that process throughout the year and tackle your estate plan. For more detailed information,
reach out to our certified financial planners at Park Place Financial.