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Updated: May 18, 2020

We are officially six months into the year already, wow how time flies. This is the perfect time to assess your tax situation and to start planning to see what April 15th of next year will look like for you. Here are some TAX Planning Tips to help you do just that.

  • Invest in Tax-Deferred Retirement Plans (Ex. 401k, 403b)

  • The contributions to these plans accumulate TAX FREE until withdrawn, which is usually near retirement.

  • Flexible Spending Account (FSA)

  • The contributions to this account are NOT included in your salary so it reduces taxable income when you file your taxes!

  • Good to have because typically there are expenses that are not covered under insurance plans and these funds can be used for that.

  • Be CONSERVATIVE with your contributions because amounts that are NOT spent at the end of the period are forfeited to the employer.

  • Eliminate Non-Deductible Interest with Home Equity Loan

  • These loans are available if you own a home that has equity* in it.

  • With these loans you are able to pay off non-deductible interest loans ( consumer loans) with deductible interest loans (home equity loans)

  • Downside to this is that if you fail to make payments the lender can foreclose on your home so be diligent about making payments on time.

  • Invest in Tax-Exempt Bonds or Mutual Funds

  • Interest on Bonds are free from Federal taxation and in some cases State and Local taxes

  • Sell Securities for TAX LOSS

  • This can be done to offset a capital gain. When the securities are sold for capital loss reinvest the proceeds in other securities that are not identical for a WASH.

  • Accelerate Deductions/ Defer Income

  • Pre-pay expenses

  1. Expenses pertaining to next year can be paid in the current year. For example: In December of the current tax year, prepay property tax on home as well as charitable contributions

  • Sell Home Without TAX Consequences

  • You can defer TAXES on capital gain if

  1. Buy a new house within 2 years after sale of other home

  2. Purchase price of new home is at least as much as the adjusted sale price** of old home

  3. Place of Residence

  4. Both old and new homes can be your place of residence

  • Shift Investment Income to Child

  • Open Savings account

* You have EQUITY in your home when the appraised value of your home is greater than the amount you have left to pay your home off or owe your lender. For example

  1. Appraised value of your home is $200,000

  2. Balance owed on your mortgage is $180,000

  3. So, $200,000-$180,000=$20,000 total equity you have in your home

**Adjusted Sale Price is the price of the sold home less any selling expenses and less any fixing up expenses.

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