Why not give yourself the gift of tax savings this tax season? You have until May 17, 2021 to file your taxes. The following are some benefits of these strategies:
1. Max out your IRA if you’re not retired. Whether you have a 401(k) or 403(b), saving the maximum allowed by the IRS not only sets you up for greater financial security in retirement, it reduces your taxable income this year.
2. Take your RMD if you are retired. Once you reach 70½, you must begin to take money out of your IRA. The consequence of not doing so is a hefty 50% excise tax, so don’t neglect this! If you don’t actually need all of the money you’re required to distribute, consider making an IRA charitable distribution of up to $100,000.
3. Cut your losses. No one has a perfect investment track record. If you’re holding onto depreciated stock, sell it now and deduct the loss. You can use the tax savings to offset capital gains on appreciated securities.
4. Cut your gains — and do something good. Maybe 2020 was your year, and your portfolio has grown a great deal. That means your capital gains have too. To minimize the tax burden, donate some of those stocks to charity. You avoid paying tax on the gains and you can deduct the value of the gifted shares (note that charitable deductions are subject to limitations).
About Robert Elwood
Bob Elwood is co-founder of Practus, LLP. With over 30 years of experience, his practice focuses primarily on investment funds, start-ups, real estate, and other investments. He also serves as outside general counsel to several wealth managers and technology companies.
As a business lawyer with tax savvy, he regularly advises entrepreneurs and owners of new companies on tax planning ideas, including entity formation and creating partnership and LLC agreements, and he has handled hundreds of reorganizations, mergers, and acquisitions.
Bob has appeared on Nasdaq Trade Talks and has been quoted in U.S. News & World Report, AMBCrypto, and other publications.
Practus, LLP provides this information as a service to clients and others for educational purposes only. It should not be construed or relied on as legal advice or to create an attorney-client relationship. Readers should not act upon this information without seeking advice from professional advisers.