A little advance planning can shave hundreds – if not thousands – of dollars off of your tax bill this year. Here are three effective tax-saving strategies you should consider adding to your financial planning and wealth preservation plan:
When you’ve experienced capital losses on assets – such as stocks that have declined in price – you can potentially use those losses to offset part or all of your capital gains elsewhere. If your portfolio lacks capital gains, your investment losses may be used to offset up to $3,000 in taxable income. These losses may be carried forward to the next tax year, where they can offset more gains or income. If you prefer to keep the losing stocks in your portfolio, you can always buy them back – but you should wait at least 31 days to do so. Otherwise, the transaction will be considered a wash sale, and you won’t be allowed to claim the loss for the current tax year.
Flexible Spending Account
Check with your employer to see if they offer a flexible spending account (FSA). This allows you to set aside money for health, child, and dependent care expenses on a pretax basis. When you withdraw money for these purposes, you incur no tax liability, lowering your eventual tax bill. These contributions are also exempt from payroll taxes for Social Security and Medicare. Failure to actually use the funds in your FSA for their intended purpose can result in their forfeiture. However, the IRS now permits up to $500 in qualifying expenses to be carried forward into the following tax year. This option is only available to you if your employer has chosen to allow it, or you’ll otherwise have until the end of the year to spend down your FSA.
The single largest tax benefit of home ownership is the deduction of mortgage interest payments. You can deduct the interest you pay on a mortgage loan secured by a main or second home, up to total mortgage balances of $1 million. Any points on your mortgage are also tax-deductible, as is mortgage insurance. You’re entitled to claim your property taxes, and you can also take deductions for numerous home improvements related to energy efficiency. You must itemize in order to take advantage of all these deductions, but they can save you a tremendous amount of money – providing a big incentive to finally take the plunge and buy a home of your own.
Minimizing your tax burden requires a comprehensive financial analysis by investment professionals. At Werba Rubin, we’re committed to helping you achieve your goals by making the most of your financial resources, and that includes avoiding the expense of unnecessary taxes.
The information herein is general in nature and should not be considered insurance, legal or tax advice. Please consult with an insurance legal or tax professional for additional information on specific situations.
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Investment advisory services provided by Werba Rubin Wealth Management, LLC (“Werba Rubin”). WR 16-020 Securities transactions are offered through a non-affiliated entity, Loring Ward Securities Inc., member FINRA/SIPC.
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