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Tax Tips - Save on Taxes

Tax-Saving Tips and Financial Planning Strategies

Under the current tax climate, the best approach to successful tax planning is to implement strategies that reduce adjusted gross income (AGI). AGI is the amount that is reported 2019 or 2018 Form 1040 tax return, line 7 (on your 2017 Form 1040 tax return, on p.1, line 37, at the bottom of the page and again on p.2, line 38, at the top of the page). However, this approach runs contrary to our natural desire to strive to earn greater income.

As AGI increases from $100,000 to $250,000 to $500,000 the Federal rate at which it will be taxed will increase from 24% to 37%. Both itemized deductions and personal exemptions will be reduced or even phased out completely. Such income will be subject to the Alternative Minimum Tax (AMT) and to the surtaxes on earned income and capital gains, as calculated on Forms 8959 and 8960, respectively, as enacted by the American Taxpayer Relief Act (ATRA) of 2012.

There are a variety of strategies that can be pursued to reduce AGI. Amongst them are:

  • Shifting income to other family members (primarily children) who are in a lower income tax bracket
  • Purchasing municipal bonds to maximize tax-exempt interest income
  • Reducing flow-through income (i.e., income from self-employment businesses, Partnerships, S-Corporations or rental real estate) by maximizing expenses and taking advantage of bonus depreciation allowances
  • Utilizing the installment sale method on the sales of property
  • Increasing contributions in IRAs or similar tax-advantaged retirement accounts
  • Increasing contributions in Health Savings Accounts (HSAs)
  • Making charitable contributions directly from an IRA to the charity(ies)

I would be happy to discuss any of these and other strategies with you at your convenience.

Following below are several strategies and suggestions to help clients to improve their financial planning, and possibly reduce their income tax liabilities. These are in response to the most frequently asked questions I receive from my clients



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