As the year gets closer to ending you may have already started thinking about your taxes. How will they play out this year? There’s no doubt this will be a tax year like no other, with all the changes taking place thanks to the Tax Cut and Jobs Act. So, whether or not you’ve started thinking about and planning for your 2018 tax return, the time is almost here. And if you haven’t then you should start now. There are many ways to cut your tax bill, but you have to be proactive. One area to take a close look at is your investment portfolio.
Lower Your Tax Bill on Investments
This is how many wealthy people make their money, so it’s important to do whatever it takes to protect your investments from the taxman. Here are four simple ways to help you save more on your investment income.
1. Analyze Your Portfolio and Harvest Losses – anyone who invests should always be looking for opportunities to harvest any losses they incur. If you have any underperformers that you need to get rid of then now is a time to do it. This will help offset your gains, which will lower your tax bill. In fact, if your losses exceed your gains you can actually use up to $3,000 and apply it towards other income. You can even carry forward any portion you don’t use indefinitely, so keep good records for future tax years.
2. Contribute to Tax-Deferred Retirement Accounts – one of the best and easiest ways to invest in your future and save on taxes is by contributing to a tax-deferred retirement account. If you don’t have one already there’s still time. And if you haven’t contributed the maximum allowable amount tis year, there’s still time for that, as well. This not only lowers your immediate tax bill, but it could also lower your income enough to put you in a lower tax bracket.
3. Pay Your State Income and Property Taxes Now – another way to lower your tax bill is to pay your property taxes and state income taxes before the end of the year. This can also help lower your income level. There are other possible benefits of doing this. If you pay your local taxes now it could lower your income level enough to make you eligible for other tax breaks or credits.
4. Accelerate or Delay Your Income – in many cases you can determine when you get paid. In other words, you could accelerate your income to receive it sooner, or delay it to receive it later. It’s a good idea to defer income if you think your marginal tax rate is going to be high now, and lower at a later date. The opposite scenario works too.
Whatever moves you decide to make, be sure you don’t wait any longer. Your time to take action is running out. So, be proactive and make these moves before the 2019 tax season begins.