As financial advisors, we recognize that the outcomes on an income tax return are the culmination of many occurrences and decisions. Tax efficiency is a vital part of a financial plan at every stage, and so we approach tax planning as both a year-round and lifelong process. With that in mind, here are five areas…
With tax-filing season behind us, I’ve heard a lot of people express disappointment in the way their taxes were done. The complaints are not only from clients – tax preparers are also feeling frustrated with the process.
Tax Loss Harvesting is a subject that usually comes to the minds of investors’ right before the end of the year when they start thinking about taxes. While that is fine, we like to be a bit more tactical in finding the right opportunities to harvest losses throughout the year. Investments can be volatile and it’s entirely possible that an opportunity to harvest losses may arise earlier, only to disappear before year-end. It is of course preferable to have a loss disappear because you’ve either made money or broken even. Nevertheless, there is some strategy involved in finding an asset with a short-term loss, selling that asset, and buying another in its place in order take advantage of the tax deferral. This strategy can work to your advantage, when used at the right time.
When it comes to making tax decisions in your portfolio, you don’t want to risk a costly mistake. Given some of the counterintuitive realities regarding effective tax management, that’s a real danger. So in an effort to prevent you from falling prey to one of the common errors surrounding portfolio taxes, here are three surprising…
Governor Martin O’Malley recently signed a new law that will reduce the sting of estate taxes over the next several years for Maryland residents. So how does the Maryland tax compare with the federal version? As defined by the IRS, “The Estate Tax is a tax on your right to transfer property at your death.” The federal government imposes a tax on taxable estates in excess of $5.34 million (the individual federal exemption amount, which increases for inflation annually). Maryland currently imposes an estate tax on taxable estates in excess of $1 million (the state exemption amount).
Given the time of year, you may well be in the midst of gathering data for your 2013 tax return. As you embark on this project, you should be aware of a few new taxes you may have to pay. While I can’t cover everything, here are some of the bigger changes you might encounter.
(The changes outlined in this article were implemented in 2012 with the passage of the American Taxpayer Relief Tax Act (ATRA) of 2012, or with the Affordable Care Act).
Discussing capital losses with clients isn’t usually much fun, because it involves the loss of money. The good news is that when we sell a position with a capital loss, it creates a taxable loss. And capital losses can be used to offset capital gains. If a taxpayer has taxable losses in excess of their capital gains, then they can deduct up to $3,000 of those capital losses against their ordinary income.
While Americans have always been a mobile people, retirees aren’t moving to new places as frequently as they have in the past. According to census data, between 2010 and 2011, just 3% of those age 65 and older relocated. A lot of 401(k)s have taken a hit, the housing market fell, and many of those who planned to retire are delaying that move. This has resulted in the lowest level of migration for those 65 and older since the end of World War II.
It’s that time of year when everyone gets excited for their hoped-for tax refund. But should we really be celebrating?
Are you paying too much in taxes? Are you sure you have claimed every possible deduction? It is possible to do your taxes yourself — especially if you have a very simple tax situation — and there are tools available out there to help you. However, in this era of increasing specialization, there are some very good reasons to hand this responsibility off to a professional: