Few weeks ago I hosted a seminar about using various tax saving strategies to secure a large refund for individuals. In this post, I am going to highlight some of the key points and share with our readers.
Maximize contribution to a 401k plan – the limit for this year is $17,000 per person. This strategy alone will save you big money in taxes. If you can’t maximize it and you employer offers a match, at minimum contribute the amount necessary to get the maximum match so you don’t miss out on that “free” money.
Participate in your employer’s pre-tax benefit plans - this include commuter benefits, group life and L-T disability insurance, medical FSA, dependent care FSA.
Deduct employee business expenses – unreimbursed expenses include cars, meals, travel, home office, license fees, professional subscriptions, telephone, and office supplies.
Contribute to your IRA or Roth IRA - your contribution to the traditional IRA may be deductible. Roth IRA contribution is not deductible but it’s a great way to save for your retirement.
Charitable contribution – it can be cash or non cash. Consider donating used items to Salvation Army & Goodwill and get tax deductions. You can also donating appreciated stock, that way you will never have to pay tax on the appreciation and your donation is equal to the fair market value of the stock.
Assess whether investment portfolio should be re-allocated – 15% long term capital gain rate is scheduled to return to 20% in 2013. Qualified dividend is scheduled to be taxed at your marginal ordinary income rate. Planning tip – consider selling highly appreciated assets by end of the year.
Use unrealized losses to absorb gains – you can sell the original stock, and then buy back the same stock at least 31 days later.
Consider Roth IRA conversion - Roth IRA payouts are tax-free and thus immune from the threat of higher tax rates.
These are just some of the strategies that can be taken to save taxes. By contacting me, we can personalize a plan that will work best for you.
John Jeng, CPA