Tax Saving Strategies
April 15—ask any American what that date means to them and they'll likely respond with a snarl: "taxes." It also happens to be the day each year when everyone promises to "not pay that much again next year!"
As an occupational hazard, I think about taxes nearly every day, along with ways to help people live up to their promise. The following are some tax saving strategies you may want to consider:
- Maximize your annual contributions to your employer sponsored retirement plan (401(k), 403(b), profit-sharing plan, etc.). This will yield an immediate reduction in taxable income, as the contributions come out of your wages before taxes.
- See if your employer offers dependent care reimbursement accounts or medical reimbursement accounts. These employer-sponsored programs (offered by 97 percent of U.S. companies) allow workers to put away up to $5,000 annually from pretax income to pay for qualified dependent care or non-reimbursed medical expenses.
- Weigh the benefits of municipal bonds and if they are right for you. The income earned is free from federal taxes and possibly free from state taxes as well. These bonds may be subject to other taxes, such as local or the Alternative Minimum Tax (AMT). (Now is a particularly inviting time to look at municipal bonds, as most prices are lower but their yields are on par with Treasury bonds.)
- Learn about the Roth IRA.Although it doesn't reduce taxable income, the assets within it grow tax-deferred and qualified distributions are tax-free. (You have until April 15 to open an IRA for the previous tax year). With this overview I don't mean to imply that taxes should drive your investment decisions, but they shouldn't be ignored either.Considering the tax implications of your financial decisions can make a huge difference in how much money you'll potentially keep in any given tax year.
Please call me at (781) 598-9309, if you'd like to discuss any of these strategies.