Working with an experienced financial advisor who is also a CPA can potentially lower your taxes while ensuring you adhere to IRS regulations. They inform you about smart actions to take throughout the year, not just when preparing your return. Explore these seven tax optimization strategies to help you save when April arrives.
7 Tax Optimization Strategies From Your Knowledgeable Sun City West Financial Advisor / CPA
1. Tax-Free Gifts
You can give assets to family members without incurring taxes up to a certain limit. The gift tax exemption for 2024 is $18,000 to an individual or $36,000 to a married couple. The IRS allows you to exempt up to $13.61 million per individual in lifetime gifts or $27.22 million per couple.
2. Tax Loss Harvesting
This strategy helps offset capital gains tax, which applies to profit from selling real estate or other valuable property. You pay 37% tax on these funds if you sell an investment within 12 months of purchase, and between 0 to 20% when you sell the asset more than 12 months after you buy it. In this situation, your advisor will create a harvesting strategy. This type of plan lowers your capital gains tax by strategically timing asset sales.
3. Threshold Planning
Your advisor may recommend deferring or accelerating a stream of income to prevent you from moving up to the next tax bracket. The threshold planning strategy strives to qualify each dollar you earn for the lowest possible tax rate.
4. Retirement Savings
Contributing to a tax-advantaged retirement account reduces your annual taxable income. You can put up to $23,000 in a 401(k) account in 2024 or a maximum of $30,500 if you’re 50 or older. If you’ve reached that limit, you may want to open a traditional or Roth IRA. Your advisor can provide more information about the best types of retirement investments based on your personal and financial objectives, in addition to tax considerations.
5. Tax Credits and Deductions
A financial advisor and CPA stays up-to-date with tax laws so you can take advantage of all available incentives. They help you file the necessary documentation to claim the appropriate deductions and credits based on factors such as your income, family structure, and lifestyle.
6. Carry-Forward Strategies
You can potentially reduce the impact of capital losses by postponing them for a future tax year. In 2024, the IRS lets you offset $3,000 in taxable income with capital losses. You can carry over losses over this threshold indefinitely to offset future income.
7. Special Investment Accounts
Decrease your taxable income further with investment accounts for designated purposes. If you have children, you can set aside money for college with a 529 plan. Flexible spending accounts through your employer allow you to divert pre-tax income for dental, medical, and child care expenses.
Disclosures
Content provided through a collaboration with Paul Axberg and Schnebly Hill Digital Marketing. This content was generated using the help of AI research, and is intended for informational purposes only. Please consult a qualified professional for personalized advice.
