Income Tax Strategies

To Pay or Not To Pay, That is the Question

When it comes to taxes, everyone should pay their fair share, but where is the line drawn and who draws it? There are strategies that may reduce the tax bit each and every year. many times this can be achieved by making a few changes in your current investment portfolio or by simply making a few changes with your tax advisor in the way that you file your tax return. Let's get together soon for your one hour, no-cost consultation and see if you are optimizing the tax reduction tools available to you.

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Building a Future Plan with Present Benefits

Often, when asked if they are currently saving for retirement, people will give answers with comments like, "I can't afford to save for retirement right now," or something equivalent. In all actuality, these days, you can't afford to not take advantage of the many ways that you can save for retirement.

If your employer is offering a means of putting away a portion of your income on a pre-tax basis you would only see your pay reduced by a portion of the amount that you actually invest. For example, if you are in the 25% tax bracket and you invested $100 per month, you would only see a reduction of $75 a month in your paycheck. Also, many employers match a portion of what you invest. When you add this in, a $75 reduction a month in your check could immediately be worth as much as $200 a month for investing assuming a 100% match. If you were to earn an average of 8%, that $75 reduction a month could be worth $117,800 over a twenty year period. Although this is purely hypothetical example and does not represent the returns of any specific investment, which will fluctuate in value, it demonstrates that you cannot afford to not be investing for the future.

Even if your employer doesn't provide a retirement plan, you can still establish a plan that will work for you. You should talk with your FinBal® Qualified FSP about using the strategies that will best meet your goals and objectives while adapting to your particular situations and circumstances. They can help you to establish, build and maintain a well balanced plan.

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The Lord Giveth and the IRS Taketh Away

Many people have the feeling of being robbed when it comes to paying taxes. There’s a tax for earning an income and there’s one for making a gain. There’s a tax for buying and there’s one for selling. It seems there’s a tax for living and we know that there’s a tax for dieing. It can feel like no matter what way you turn there’s another tax!

While there is no way to completely avoid the taxman legally, there are provisions within the tax code that will allow you to substantially reduce the amount that you pay in taxes on an annual basis. For example, you have the ability to reduce your income tax each year while saving for retirement by using your employers’ retirement plan or an individual IRA. Also, if you qualify, you could reduce your tax bill each and every year by simply reallocating a portion of your investment portfolio.

Your FinBal® Qualified FSP can help you review your entire financial arena and assess a course of action that will best suit you. Pick up the phone and take advantage of the one hour, no-cost, consultation. Let Financial Balancing work for you!

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Section 42 and the "Natural" Way of Reducing the Tax Bite

There are a number of individuals who will tell you that “taxes aren't fair or even constitutional”. Where are those geniuses when you’re facing action by the IRS, should you be foolish enough to follow their “sage” advice? While you may not be able to evade the taxman, you can avoid the tax bill while playing by the rules. Section 42 of the Internal Revenue Code (IRC) makes provision for investors, with the right profile, to invest in “Affordable Housing” (not HUD) programs to lower there tax bill by as much as $9,900 per year. This is accomplished when investors collectively provide the funds to build housing that allows individuals on fixed incomes (usually seniors) to pay a rent that is based on their income rather than the prevailing rate. Also, if deemed suitable, an investment in a natural gas program could eradicate part, if not all, of the taxes due on a capital gain or an exceptional earnings year. There are a number of companies that have proven track records of tapping into existing reserves and thus provide good returns as well as the initial write off. Either of these are a part of the solution and not the whole. Get together with your FinBal® Qualified FSP to see if you are paying too much tax and if any of these fit into your well balanced financial plan.

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It's Not What You Make, It's What You Keep That Counts!

Generally, when it comes to investing, everyone only talks of the money that you are going to earn while never focusing on what should be a priority… Keeping It! I’m not talking about market fluctuations. I’m talking about taxes.

Depending on each individual investor’s particular situation, careful consideration should be given to investing a portion of their portfolio in investments that provide tax benefits.

Did you know that there are investments that provide tax credits which reduce your yearly tax bill? That’s right, if you qualify, a $10,000 investment could provide a credit that would reduce your tax bill by an average of approximately $1,050 each and every year that you are in the investment. A credit is not a deduction, but rather a dollar for dollar reduction of your actual tax bill.

This is not a credit that is later recaptured, here today and gone tomorrow. Some investments provide deductions that can offset and even completely eradicate the taxes due on a large gain or unusually high earning year’s income. Then there are also investments that provide income streams that are tax favored so that you keep more of what you actually earn. Many of these provide income and appreciation while providing tax benefits.

It is of utmost importance that you remember that there is no one-size fits all plan. During the one hour, no cost consultation your FinBal® Qualified FSP can begin to help you better understand what investments are available and how they work while making sure that they are suitable for your particular situations and circumstances.

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