The purpose of tax planning is to minimize taxes for the current tax year and/or over your lifetime, and best time is during the last few months of the year. Here are some examples of tax planning:
- Roth Conversions: moving $ from pre-tax accounts to Roth accounts in lower-income years in order to lower your future tax liability
- Mega Backdoor Roth Contributions: supercharging your tax-free retirement savings by utilizing the $66k overall IRS limit on 401ks
- Capital Gain Harvesting: joint tax filers have a 0% capital gains tax rate if their taxable income is less than $89,250
- Capital Loss Harvesting: reducing current year taxes by selling investments at a loss and reinvesting in a similar investment
- QCD's: if you're at least 72, you can donate to charity directly from your IRA as a tax-free withdrawal and it counts as your RMD
Tax planning can also be as simple as:
- Increasing your paycheck withholdings or making estimated tax payments to avoid underpayment penalty
- Maximizing your retirement plan contributions
- Making an IRA, Roth IRA, or backdoor Roth IRA contribution
- Making HSA, FSA, and 529 college savings contributions
Get in touch to learn more or to see if HWM can help.