Lund & Guttry LLP

36917 Cook Street Suite 102, Palm Desert, CA 92211

 

Phone:  760-568-2242

Fax:      760-346-8891

  

Website: www.lundandguttry.com

July 2019

Time For A Tax Tune-Up

Article Image

The dog days of summer are a great time to review your finances and make the adjustments needed to ensure a tax-efficient year. Here are some strategies you might consider to minimize taxes:


RETIREMENT CONTRIBUTIONS
The IRS classifies many retirement plans as “qualified,” meaning there are certain tax advantages to investing in them. Contributions made to a 401(k), SIMPLE or Simplified Employee Pension (SEP) plan are taken from your check pre-tax, meaning they are tax-deferred. If, for example, you’re in the 32% combined income bracket, you pay $320 of income tax for every $1,000 earned and not contributed to the plan. Same goes for a traditional IRA if you qualify by income. And potential growth is also tax-deferred in all of these retirement plans.


HEALTH SAVINGS ACCOUNT
If you have a Health Savings Account and you don’t max contributions, you’re missing a good deal. HSA contributions, potential growth and withdrawals made for qualified medical expenses are tax-free. You can continue to take distributions from this triple-tax-free savings vehicle in retirement, too.


RETIREMENT DISTRIBUTIONS
If you are retired and drawing income from multiple sources, you’ll want to do so in the most tax-efficient way. As long as you keep in mind that distributions from qualified plans must begin by age 70 1/2, it often makes sense to first withdraw money from taxable investments and accounts in order to let money in qualified plans continue to potentially build tax-free. Incidentally, a Roth IRA doesn’t require minimum distributions, so you can let that grow as long as you want.


OTHER TAX IMPACTS
You can’t deduct 529 plan contributions on your federal return, but many states let you deduct them on state returns. On either level, earnings grow tax-deferred and withdrawals made to pay qualified education expenses are tax-free. If you’re considering buying a first home, mortgage interest and real estate taxes are deductible up to certain limits.


SUBSCRIBE

Enter your Name and Email address to get
the newsletter delivered to your inbox every month.


CONTACT US

Enter your Name, Email Address and a short message. We'll respond to you as soon as possible.

The information and opinions contained in this web site are obtained from sources believed to be reliable, but their accuracy cannot be guaranteed. The publishers assume no responsibility for errors and omissions or for any damages resulting from the use of the published information. This web site is published with the understanding that it does not render legal, accounting, financial, or other professional advice. Whole or partial reproduction of this web site is forbidden without the written permission of the publisher.