T 650.342.4394
F 650.342.1708
GRODIN CPA
  • Home
  • Your Taxes
    • When to Call us
    • Stock Option HELP!
  • Your Business
  • Our Firm
  • Contact Us
  • Blog
  • Portal
  • TTS ASSOCIATES
  • Home
  • Your Taxes
    • When to Call us
    • Stock Option HELP!
  • Your Business
  • Our Firm
  • Contact Us
  • Blog
  • Portal
  • TTS ASSOCIATES

Year-End Tax Planning 101 - Part 2

12/12/2014

2 Comments

 
Picture
Last week I talked about tax planning when income is the same or higher than usual. This week i'll focus on what to do when income is lower than normal. Why do anything if your taxes will already be low? Well, you may be able to save a lot of money in the long-run if you are thinking beyond this year. You may be able to take advantage of 0% or 15% rates instead of 28-39.5% in the future. 

Step 1: Know your tax position:  Sound familiar? see part 1 to familiarize yourself with this step.

Step 2: Take Action. If this year's income is low: There are options to shift some of your income or expenses, or roll over IRAs.

Shift income into the current year, and delay expenses - If you recognize income in December instead of January, you have changed your tax position. Likewise, you may be able to make a deductible expense payment in January instead of December. 

Consider selling some of your appreciated stock - If you are married and make less than 72k, capital gains are now at 0%. This may be chance for you to recognize some of your gain. Rates may not be this low forever. 

Sell IRAs or Roll IRAs into Roth IRAs - By rolling over your IRA into a Roth IRA, you will recognize income in the current year, but the money will not be taxed again. This is perhaps the easiest way to recognize income sooner. 

I have a successful client who decided to take 2014 off and live in Paris. Without the day job, her income is way down, so she is rolling some of her IRA into a Roth IRA this year, taking advantage of the low rates. 

Another client is elderly and in a nursing home, but with large IRAs. Rather than just taking out the required minimum amount, he is withdrawing larger amounts each year, so they can be taxed at his low rate. His children will inherit cash rather than an IRA being taxed at 28% to them.

Summary: Effective tax planning involves taking into account your current tax position, where you may be in the future, and possible changes you can make. Every tax situation is unique. The tax code is littered with limitation and exceptions, but these basic concepts will help over time. If you want to find out just how much you can save, talk to your tax specialist.

2 Comments
Wilma Acheson
12/13/2015 03:36:46 pm

Any and all information is appreciated. You are keeping us in the loop. Thank you.

Reply
Levi Hutton link
4/26/2021 12:24:50 am

Awesome blog yyou have here

Reply



Leave a Reply.

    Picture

    Author


    I spent 13 years in big-4 accounting firms before leaving to start his own small firm in San Mateo. You can find more about me in the "our firm" tab. 

    I plan to use this space to highlight tax concepts and tax law changes in easy to understand language. Each post will have examples on how typical taxpayers are affected by life events or the ever-changing US tax landscape. Nothing in here is canned - its all written by me. 

    Archives

    December 2015
    November 2015
    August 2015
    February 2015
    January 2015
    December 2014

    Categories

    All
    Tax Planning

    RSS Feed