At the start of every financial year, one major concern people have borders on taxes. As tax always has to be paid, this has remained a constant fear for all. While some people wait around till April 15 before facing their
tax-related issues, others decide to be pro-active long before they are required to pay their taxes. If you are one such proactive person- or you want to be, then follow this article with us.
1. Give to a charitable cause:
This particular tip is necessary as it has multi-dimensional benefits. By donating to a not-for-profit cause in your community, you are not only contributing to the improvement of the standard of living of those in your community and improving the community
as a whole, you could also get a deduction from your income tax for this cause. Yes, it is good to do good so you have to explore this channel to the fullest when you need to because you will be touching the lives of people too.
2. Invest your
While it could seem like a good idea to receive your tax refunds and just splurge with them, we believe it will be a better idea if you invested this in accounts like the IRA’s because it provides you with better options. This is a worthy
investment strategy as you could then claim the deductions and use them to offset all or part of next year’s tax dues when it pops up. This would help you have the semblance of savings
on your gross income as little or no extra money will be removed. Cultivate and continue this habit, and you will be smiling more to the bank as these rather small investments will pay off over time. The best part is that you won’t feel the effect of saving
when you do but the benefits are immense at the end. And you can save money for your personal need or can check best personal loans
3. Reorganize your investments
The benefit involved in reorganizing your investments is similar to that gained by a motor that operates on more efficient systems without the need to constantly refuel; it is more efficient and more covers more grounds in quicker time. In like manner, you
can capitalize on small tax advantages and let them yield long-term goals.
To reorganize your investments, you can move less efficient ones like international stocks and other assets you own that are taxed often into a tax-deferred account like with the IRA. For less-taxed assets of yours, you can move these into taxable accounts.
This way the taxes paid are lesser on all counts so you have an advantage with this system.
4. Think moves ahead:
Whether to balance your portfolio or to the end that because your desires have changed, some investments will no longer be needed or for other personal reasons, you will find that you might have to sell off some of your investments, like many other people
do. Before you do this however, be proactive and look into the later and not just the now or your immediate needs. This advice is based on the reality that selling could also incur tax. Now, because you don’t want the tax consequences that come with such sales,
you can carefully choose your investment option.
To effectively do this, you can seek the services of an investment company who are well-learned and grounded in this aspect and will help you weigh your options while telling you the pros and cons attached to all. Here at Betterment, our Tax Impact Preview
helps investors see the potential tax to be accrued when a sale is made. If you then realize that the disadvantage of selling such investment outweighs the advantage, you might want to defer the sale until you are at a vantage point or its to your advantage.
5. Turn losses to gain
Because investments that are slowly or totally not growing would do more harm than good to your portfolio, it would pay to sell these off and replace them with more efficient investments. By doing this, you can get a tax deduction for investments that yielded
losses and then use this deduction to offset taxes garnered on assets that appreciate. This whole process known as tax loss harvesting is usually done automatically for investors who visit any of the many automated services available. All investors should
bear in mind that all investments bear risks of their own and could result in a loss.
By engaging in year-round tax-planning you get to be in control of your tax situation and you also get to be rarely ever unfazed when the time to pay taxes comes around. If anything, you get to keep more of what you earn and you can plow this into other
ventures that could put in better standing.