You may have noticed that the Bloomberg Aggregate Bond Index is off to one of…
Now that it’s tax season, it might be a good idea to start planning to reduce taxes right now by reviewing your IRS Form 1040 with your financial advisor or tax professional. A review of Form 1040 can reveal opportunities to save on taxes you may have missed before. For example, the difference in rates between ordinary and qualified dividends for a taxpayer in the highest tax bracket is 19.6%. Taxpayers in lower brackets pay only 15% on long term capital gains and qualified dividends versus regular income tax rates for short term gains and non qualified dividends. Short term capital gains distributed by mutual funds are taxed as ordinary dividends, so your choice of investments and investment vehicles can make a difference.
Capital gains should be offset by losses to the greatest extent possible. An effective tax loss harvesting program will take advantage of losses year round and not just at the end of the year. Other tax saving opportunities include using IRA distributions to make charitable gifts, reducing your exposure to the Alternative Minimum Tax and limiting taxes on Social Security. The Medicare Surtax adds 3.8% to net investment income over certain thresholds. If you have income from a trust, the highest rate of 39.6% applies to income over $12,300. Planning now will save dollars later.
If you would like to schedule a 1040 review, please give me a call.