by Frederick A. “Rick” Fisher, MS, CFP®
No matter how the markets are performing, there’s one thing in the economy that is almost certain; high tax bills in the future to help fund the deficit. Not only do marginal federal income tax rates continue to be over 33% for married couples making more than $230,000 per year, but penalties for tax errors are expected to increase in 2016. Instead of worrying about the recent market volatility, I recommend focusing on what’s for certain and consider some last minute tax planning ideas this year.
Just like any other year, your tax planning strategy this year should be based on reason and not emotion. Tax strategies should be aligned with long-term goals and taxpayers should be mindful of the long-term consequences of their actions.
Some clients who are eager to lower their tax bills ask me if they should sell their positions in taxable accounts to pay the lower 15% capital gains rate and avoid the ordinary income tax rate. On the surface, this may sound reasonable. However, investment decisions should never be made solely for tax considerations. After a thorough portfolio review, some tax harvesting may make sense, however selling everything in a taxable account rarely makes an investor better off in the long term.
Here are some actions you should consider taking now to potentially lower next year’s tax bill, including:
Paying for next semester’s tuition early
Accelerating some medical expenses into this year
Making charitable contributions to your favorite charity
Donating appreciated assets that you will not need for retirement
Gifting up to $13,000 in cash to family members
Buying depreciable assets if you have older equipment that needs replacing
As always, maximizing your contributions to tax-qualified retirement plans will allow you to keep more money sheltered from the future tax rate increases until you retire. As the end of the year approaches, let’s review your current circumstances to evaluate the best options available to you. In today’s volatile economy, it’s important to minimize our taxes to make the most of our wealth.
About Rick Fisher
Rick Fisher is a financial consultant offering comprehensive financial planning and investment management with Ostrofe Financial Consultants, Inc. in Grass Valley, California. His goal is to help clients prepare for retirement and pursue their financial dreams in a fun and personal way. Rick serves clients in 15 states, though most reside in California, including the greater Sacramento, Los Angeles and San Diego areas.
Credentials and Experience
Rick holds FINRA Series 7, 63, 65, 24, and 51 licenses and is supported by Ostrofe Financial Consultants and National Planning Corporation. He also holds his California Insurance License and the designation of CERTIFIED FINANCIAL PLANNER™ professional (CFP®). The CFP® designation is awarded to experienced financial professionals who pass an examination and pledge to abide by a strict code of ethics. He holds himself to their high standards of integrity, objectivity, professionalism and confidentiality. Please note: NPC does not render tax or legal advice.
How Rick Can Help
Rick strives to take the fear and stress out of financial planning. He works with clients to uncover financial issues they may not have known about or have not yet addressed. Rick and the Ostrofe Financial Consultants team are there to answer questions, guide clients towards their goals, and help them feel confident in their future. To learn more about how Rick may be able to help, call his office at 530-273-4425.