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Financial Q&A
Q
Finance
Protecting your investment portfolio
Q. I am a financial procrastinator and it seems I am always stressed trying to get my act together for tax season. I want to avoid the end of the year stress by working on my tax planning all year long. What tax planning strategies do you recommend? A. Organizing your tax records and paperwork is a to offset and or reduce gains from the winners. strategy that often gets overlooked or ignored. If you need help in this area, I suggest you start by getting a • Pay attention to mutual fund dividend distribution copy of last year’s tax return. You will need to review dates in taxable accounts. A fund dividend paid after a it and create a checklist of all pertinent facts. Common purchase is taxable to you in the current year. items include the following: personal information, income and investment records, self-employment and • Take required minimum distributions (RMDs) by the business documents, medical expense and charitable current year deadline (December 31st). donation summaries, and homeownership statements. Collect all the current information you have and start • Consider a Qualified Charitable Deduction for a acquiring missing data when possible. Try to avoid scheduled RMD. exhaustive searches for lost items. Replacement statements are usually easily accessible on the web. • Consider a Health Savings Account (HSA) if you Implementing an organized filing system is always a participate in a high deductible health insurance plan. good idea, but don’t make this a stressful chore. It is Allows pre-tax savings to pay for qualified medical more important to keep your process simple, safe, and expenses. easy to access. Your diligence will pay off when it comes time to prepare a return. • Review all beneficiary designations and update if needed. In addition, consider the list below for applicable tax planning strategies. A review of your W-4 is also a good practice to make • Take advantage of the 2020 annual gift tax exclusion sure you are withholding enough tax from your pay. of $15,000 per person. The IRS offers a withholding estimator on their • Contribute the maximum amount to your retirement website that can potentially help you avoid a surprise plans. Employee contributions to 401(k) plans and tax bill. defined contribution plans have a December 31st deadline. IRA contributions for the previous tax year Tax planning can be a challenging and stressful can be made up to the April 15 tax filing deadline. exercise, so consult a tax advisor for specific questions and recommendations based on your individual • Contribute to a 529 Plan or Education Savings situation. Account. Plans offer tax-deferred growth and tax-free withdrawals of qualified education expenses. William B. Howard, Jr., ChFC, CFP • Defer or accelerate income and expenses. • Gift appreciated property but sell property for a loss. • Maximize the itemized deduction benefit through additional charitable gifts. • Tax loss harvesting - sell investments with a loss Winter 2019-2020
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