Get Financially Fit

Taxes

Get Financially Fit

Eight moves to whip your tax strategy into shape.

February 3, 2018

Tax season isn’t the only time you should be mindful of your taxes. Challenge yourself to tone up your tax strategy and keep your taxes in top form year-round. Of course, also be sure to consult your tax professional and financial advisor.

1. Find a Trainer

You’ll want a heavyweight tax professional in your corner. Don’t have one? Ask your financial advisor, other professionals, friends and family for a recommendation and get interviewing. You’ll need a tax trainer to keep you focused.

2. Take It to the Max

Push your retirement contributions to the limit. For 2018, you can add $18,500 to your employer-sponsored plan and/or $5,500 to an IRA, with additional $6,000/$1,000 catch-up contributions if you’re over 50*. Ask your advisors for details. Bulking up your tax-advantaged savings trims your taxable income, too.

3. Dig Deep

Look long and hard at how your life has changed since the last tax season. Did you get married, have a baby, or send a son or daughter to college? Make sure you understand how life changes can impact your tax bill.

4. Crunch Your Numbers

Your employer withholds a certain amount of pay for taxes based on your W-4, which outlines the exemptions you want to claim. Withhold too much and you’re giving the IRS an interest-free loan; too little and you’ll owe. Find the number that’s just right by using the withholding calculator on the IRS website (irs.gov/Individuals/IRS-Withholding-Calculator) or discussing your W-4 with your tax pro.

Financially Fit

5. Get Disciplined

Getting your taxes in shape takes dedication and commitment. Diligently track and review your deductible expenses, donations and mortgage interest, as well as any credits you’re eligible for. Don’t forget relevant documentation.

6. No Gains, No Pain

If you sell an appreciated asset, you’ll need to pay resulting capital gains taxes. You can use the proceeds or pump up savings. While you’re at it, check out any capital losses you may have on the books, too.

7. Lose the Weight

Cut loose any investments that are weighing down your portfolio to offset gains from the winners. This strategy is called tax-loss harvesting.

8. Set a Goal

Flex the power of your generosity by focusing your giving strategy on a specific location or single cause. A more organized and tax-efficient approach, perhaps through a donor-advised fund or other dedicated vehicle, could help you help others more effectively.

Discuss these steps and others with your professional tax advisor; your financial advisor can help coordinate the conversation. Then you can relax, knowing you’re in great shape for the next tax season.

*Withdrawals from tax-deferred accounts may be subject to income taxes, and prior to age 59½ a 10% federal penalty tax may apply.



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