Strategies For Saving
Every year brings with it new opportunities to make tax -savvy financial moves.
Planning ahead now will make next April 15 a little more pleasant. These strategies are suggestions: You should consult with a tax advisor to choose the best plan of action for your personal situation.
- Retire some income. Open a Keogh Plan this year if you're self-employed, or maximize your contributions to your employer's 401(k) plan. Your contributions are tax-deferred, and will therefore help lower your gross taxable income.
- Inspect your investments. Keep a close eye on your portfolio and consider unloading any poor performers. You can then use your losses to offset other capital gains, and possibly some other taxable income.
- Plan to contribute to a charity regularly this year. Consider transferring stocks, bonds or other property that would be subject to the capital gains tax if you sold it. By transferring it, you can deduct the appreciated value and get a bigger tax break. If you sell the property first, you pay capital gains tax on it and then have less left to contribute.
- Pay attention to your real estate transactions. If you buy, sell or refinance this year, you should examine your settlement papers with taxes in mind. Some closing costs that you pay are tax deductible.
- Make moving a money-saver. Some moving costs may be tax deductible if you meet the time and distance tests for a job-related move. Buying a new home may also mean taking on a new mortgage. Most new mortgages bring larger interest deductions because of the way loans are structured. Homebuyers can also deduct points paid by sellers as well as points they pay. If you sell a home this year, you can exclude up to $500,000 in capital gains from your taxes if you're married and file jointly. Single filers may exclude up to $250,000. (There are certain ownership and use restrictions on this exclusion. Refer to IRS Publication 523 "Selling Your Home" for more information.) For more information, consult your tax advisor, or visit the IRS website at www.irs.gov for answers to frequently asked questions and to download current publications.