Tax Harvesting: How Investing Lowers Taxes

Tax HarvestingThere are only a few ways to get out of paying taxes. Tax evasion is the wrong way to do it. Tax avoidance is the other, legal way around it. My point is, taxes are a cost you can manage and tax harvesting is a piece of a tax efficient investment plan.

Most of us have fairly consistent income. It’s usually investment income that changes from year to year. The tax code is set up in a way that investment income is taxed at different rates. When you invest through a taxable account you have to plan for income tax on interest earned, along with capital gains tax, and dividend tax.

The tax code lets you use or harvest investment losses to offset capital gains. And a forward thinking investor might sell a gain today to avoid higher taxes in the future. Continue Reading…

The Easy Tax Preparation Checklist

Tax Preparation Checklist

Let’s face it, tax season is a procrastinators paradise. Unless you’re getting a refund. Then it’s the biggest hurry up and wait event as you try to file your return early. In either case, being organized beforehand will make the process much smoother. That’s where a tax preparation checklist comes in handy.

There’s nothing more I hate than having to waste several hours digging up that one misplaced tax form. It’s one reason I use TurboTax, because it keeps track of all my tax records year after year so I don’t miss anything.

If you do your own taxes like me, this checklist has all the tax forms, receipts, and records you might need to file your taxes this year. Then, when you finally sit down to do your taxes, you’ll have everything in front of you, so you save time and money on your taxes every year.

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2014 Dividend and Capital Gains Tax Rates

Dividend and Capital Gains TaxMuch of the discussion around investing involves managing costs. Taxes need to be part of that talk. Like fees and expenses, dividend and capital gains tax eats away at your returns.

Any time your investments make money, taxes aren’t far behind. To make it easy on us, Congress whipped up a simple complex tax code for income, dividend, and capital gains tax rates. Lucky for us, that tax code can change on a whim, making it worth staying updated on.

Before we go any further, dividend and capital gains tax are for money invested through taxable accounts only. Taxes on investments are a moot point when dealing with retirement and other tax advantaged accounts. You can buy and sell all day without worrying about the tax consequences, though I don’t recommend it. Continue Reading…

7 Tax Planning Ideas That Offer Big Savings

Tax Planning TipsDid you get the most tax savings possible this year? Is there anything you could have done differently that would have saved you more money? I bet there was.

You need to be proactive for big tax savings. By the time April rolls around it’s already too late to work the tax code in your favor. The only planning you have left is a last-minute IRA contribution before the deadline to salvage some savings.

Real tax planning is an ongoing process of making small financial changes that lead to big tax savings year after year. You need a plan for that and our extensive tax code offers up some places to start. Continue Reading…

How Long Should You Keep Tax Records?

Tax RecordsTax season is stressful enough just getting those returns finished and sent in time. Now you have to deal with storing all those tax records. Or do you?

The good news is you don’t have to be a hoarder. But before you start force feeding that shredder, there are some tax documents you should hold on to for a little while.

If you’re like me, you may be holding on to tax records out of fear the IRS will show up for an audit or maybe it’s just a keepsake of incomes past.

The hard part is deciding what records should be kept, what is junk, and how long it all needs to take up space. The IRS, of course, has all the record keeping specifics you’ll ever need. Continue Reading…