3 Ways to Preserve Your Wealth at Tax Time

As the third quarter comes to an end with the arrival of cool autumn weather, this is one of the best times to get serious about planning how to minimize the inevitable. Over 65% of the year has transpired so by now a more factual attack strategy can be implemented because much of what has occurred during the year is known or can be anticipated.

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At this point, your financial planner may now be more precise with recommendations to delay income for subsequent years as a tax strategy, and can be more specific about deductions you should take or delay to limit your estate’s tax exposure. Here’s a little primer on what to consider.

1. Defer Your Income: The first strategy to consider when planning ways to reduce your annual income tax is to discuss with your financial planner if it’s possible to defer your current tax year income until a future year. This could reduce your immediate tax liabilities and may also place you in a lower tax bracket as well, saving tax costs in two important ways. The strategy as possible with certain retirement plans, or if you own a business there may be ways to shift income to another year.

2. Shift Income to Family Members: It may also be possible for you to reduce your federal income tax liabilities by shifting income to other members of your family who are in lower tax brackets. For example, you may own a stock that generates a lot of dividend income; when you gift the stock, the tax responsibility is also shifted, and assuming you don’t exceed the $13,000 ceiling on tax-free gifts, you can reduce your tax burden. A family limited partnership might also be an appropriate way to shift income so tax liabilities can be reduced.

Of course, there are a number of factors involved with shifting income to family members so you’ll need a tax advisor to guide you on the feasibility and the consequences of moving income to family members, including children, and whether or not your income is from a C corporation, an S corporation, or a Family Limited Partnership.

3. Deduction Planning: By knowing all the deductions for which you are entitled, you may be able to significantly reduce your income tax liabilities. Part of the discussion between yourself and your tax advisor should include the value of placing a deduction in one year or another, which could increase your tax liability reduction.

It’s important you plan as well as you can to legally limit your taxation. When means are provided so you can save more of your hard-earned money, it is in your own best interests to accept the opportunity! Remember, your retirement may last three decades or longer, and you may need every penny that’s available, especially in the final years of your life you may not be able to work at a job anymore.

Unless you have an MBA in finance, it’s quite likely you don’t know the many choices available that could allow you to conserve your wealth and legally pay less in taxes. This is why it’s so important you receive advice from a competent financial professional. With the recent tax law changes and your own unique personal circumstances, it will probably be worth your while to consult with an expert in the field.

Of course, there are other strategies as well such as investing in tax-exempt income or tax-deferred income, but these will be a topic for another time.

I know it may seem strange to actually look forward to paying your taxes, but when you’ve done your homework and receive the professional advice of a credentialed tax advisor, the process of paying what you owe for the privilege of being a US citizen might not be as painful as you once imagined, and though you won’t be eager to write your check to the IRS, you’ll know that your annual legal contribution is based on indisputable facts used to your advantage which help preserve your wealth so you can provide for your family as well as secure your financial freedom during your anticipated lengthy retirement days.

Please contact us if you would like to have your tax planning reviewed now, while there is still time to make the necessary adjustments that will augment your holiday season with relief from anxiety and the security of knowing you have preserved the harvest of your year’s work. Thank you!

Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM

Synergy Financial Management, LLC

13231 SE 36th Street, Suite 215

Bellevue, WA 98006

ph: 206.386.5455

fx: 206.386-5452

www.sfmadvisors.com

Author: Dr. Daniel Levine

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