Tax planning strategies. I have tried to nail this down to the most substantial tax planning strategies the average San Diego resident can take advantage of based upon what we see on a daily basis in our practice . Here are some useful Ideas.
IRAs: I just read a publication recently that state There is little reason not to have an IRA. There are tax advantages to both the Roth Ira and the Traditional IRA. IRA contributions of up to $4,000 are available to those who qualify, and the limit increases to $4,500 if you reach age 50 by 12/31/05. Tax-deferred employee retirement plans are an even better deal. With tax rates so low right now, consider the Roth IRA. Contributions are not deductible, but earnings accumulate tax free and distributions are tax-free upon retirement. IRA distributions. IRA distributions can be a highly taxable event. Dont try this one alone folks please contact me so I can help you to minimize your tax liability
Points: There are many fees on loans on purchasing or refinancing property. One of these fees is known as points. Now lately points have become known as a bad thing because they mean that the seller has paid extra money in the process of getting a loan processed. What has evolved out of this is that instead of calling the fees Points the mortgage loan companies may call them many other things example, Doc prep fees, processing fees etc There are many others. Potentially you can write off the full amount of points paid in the year you pay them if: 1. There is no cash taken out of the loan or 2. If cash is taken out this amount was used to substantially improve the property. I could go on but to simply here is my rule: Look at your good faith estimate as the lender if any of the fees could be determined to be points rather than other miscellaneous then you will have a much better chance of writing these fees off on your taxes in the first year. Also try to keep all loan costs to around 1% total. Another important thing most people dont know is mortgage lender can make money by charging you a higher interest rate. in the form of rebates from the loan companies. This doesnt make them bad people it simply means it pays to shop around a little. Check with your bank or credit union also mortgage brokers can be useful at getting a good loan you just need to make sure your using some reputable who doesnt plan on changing things all around on you at the last second. Dont wait on a mortgage lender if they cant perform in the time allotted find someone else. The longer you wait the more they will feel you need the money and will settle for a loan with a higher interest rate or more fees. There I said it. I could go on about lending but Ill stop here. If anyone has questions please call me.
Consider
this: If your itemized deductions are not
quite as much as the standard deduction, you may be able to accumulate enough
deductions to itemize every other year. This year, the standard
deduction is married: $10,000, singles:$5,000, household heads: $7,300
To maximize deductions in even years you could prepay in December your January
mortgage payment, 2nd installment property taxes, 4th-quarter estimated state
taxes, and some portion of the following years alimony. In January
and December see the doctor and make large charitable gifts, and skip these
in odd years. See the dentist in January, June, and December, but only
in June in odd years.
Stock
Losses: A good time sell stocks could be at the end
of the year for tax purposes only.
A loss can be used either to take a loss on your return that you may be able
to use to carry forward for a number of years at a maximum of $3000 per year
or If you have gains on something you can offset the gains by selling a stock
and taking a loss. Important! Dont use
this strategy if you think the stock is going to go back up.
Making money is still making money is still making money. Let me say that
again. No just kidding but dont complain too much about paying taxes when
you made a lot of money on something. Paying taxes can sometimes can mean
you had a great year financially.
Investment
property sales: My advice here is the same as it has
always been check with your tax advisor. Ive seen many customers who didnt
have a qualified tax advisor sell investment property and because they simply
didnt structure the transaction properly ended up paying a lot of taxes.
There is an IRS code which is known as IRS
code 1031 which allows people to tax deferred exchange investment
property from on property or investment to another property or investment.
Do you think this is something wealthy people have used as a tax planning
strategy in
Hurricane Katrina victims: There are many types of tax assistance available to hurricane Katrina victims. Ill list a few here: Hardship distributions from qualified retirement plans 2. 2004 income can be used to calculate 2005 earned income credit 3. Increased casualty deductibility 4. Debt cancellation not used for tax calculations. Etc Please help these victims by getting them the right tax help they need.
Estate Planning: only estate planning fees related to tax matters are deductible These fees should be allocated between matters relating to tax advice and matters related to non tax advice. Why should you do estate planning? 1. To protect you from estate taxes which can range above 50% but not everyone will be subject to these. 2. Avoid probate: probate is a costly administrative process administered by the state if you dont have an estate plan the government has one for you its called probate the average probate will cost 8% of your estate but many of us know the stories of that amount costing much more. But wait there is more probate can take up to 2 years or more and is 100% public so everyone will know exactly what you have or you surviving spouse has. 3. There are many misconceptions out there about estate planning Including joint tenancy, using a will alone and TOD accounts are all I need. I assure you they will not.
All advise rendered herein is current as of the time it is rendered. As tax law and the IRS interpretation of such law is subject to change, we can guarantee the accuracy of this advise only for the time and situation given. 2006. Livesay Capital Solutions