How Can I Maximize Next Year’s Tax Return?

How Can I Maximize Next Year’s Tax Return?

Although the legislative landscape changed rapidly during the COVID-19 pandemic, when it comes to tax planning, many individuals are now looking at how potential changes may impact their 2022 tax return.

While we don’t yet know what actions Congress will take this year, there are tax planning strategies that individuals can leverage now to help prepare. We recommend talking them over with your CPA and financial advisor to help ensure you leverage the best strategies for your unique situation.

Why is Tax Planning Important?

The reason why tax planning is important is simple: it saves money and helps you avoid overpaying your taxes. Aside from that, however, tax planning will help you better understand what you’re spending money on and how you can get rewarded for planning for retirement or advancing your education.

1. Convert traditional IRAs into Roth IRAs

If you’re anticipating that tax rates will go up, converting traditional IRAs into Roth IRAs will allow you to take advantage of lower current tax rates. Unlike a traditional IRA, a Roth IRA does not have required minimum distributions when you reach age 72, and the distributions are not taxed when you take a withdrawal in retirement. When planning for your Roth conversion, be mindful of where you lie within your tax bracket. If you’re on the lower end, you have room to make a Roth conversion without getting bumped into the next tax bracket. 

2. Use your estate tax exemption

Many people are concerned that the lifetime estate and gift tax exemption of $11.7 million ($23.4 million for a married couple) will decrease to $5 million, $3.5 million or potentially as low as $1 million. If you have a sizable estate, gifting assets to your children or into a trust this year can allow you to use the exemption while it’s still at $11.7 million. Gifts made under current law would be grandfathered in, even if the exemption does decrease. 

3. Set up a SEP-IRA for your business

Small business owners should also consider setting up a retirement account for their business. A SEP-IRA allows employers to contribute to traditional IRAs set up for employees — including the business owner — up to the lesser of 25% of the employee’s compensation or $58,000 for 2021. This amount is much higher than the $6,000 limit ($7,000 if age 50 or older) individuals are allowed to contribute annually to a traditional or Roth IRA, making them a very attractive tool for retirement savings.

Finally, if you receive a regular paycheck, you can look into increasing your withholding. This helps you avoid owing large sums when tax season comes around and if you go over, you’ll end up getting a larger refund when the time comes. Since most people and small businesses pay too much in taxes every year, tax planning is essential.

Other Fresno Financial Advisor Articles 

Soutas Financial & Insurance Solutions Inc. 
333 W. Shaw Avenue Suite 106
Fresno, CA 93704 
(559) 230-1648 
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Fresno Retirement Consultant Takeaways 

Fresno portfolio advisor- Soutas Financial appreciated these points:The reason why tax planning is important is simple: it saves money and helps you avoid overpaying your taxes. Aside from that, however, tax planning will help you better understand what you’re spending money on and how you can get rewarded for planning for retirement or advancing your education.If you’re anticipating that tax rates will go up, converting traditional IRAs into Roth IRAs will allow you to take advantage of lower current tax rates. Unlike a traditional IRA, a Roth IRA does not have required minimum distributions when you reach age 72, and the distributions are not taxed when you take a withdrawal in retirement. When planning for your Roth conversion, be mindful of where you lie within your tax bracket. If you’re on the lower end, you have room to make a Roth conversion without getting bumped into the next tax bracket. 

Diversifying your retirement assets among a variety of vehicles and alternatives—both insurance and investment oriented, depending on what is appropriate for your situation—may offer you a better chance of meeting your retirement income goals throughout your lifespan. We help our clients with problems sometimes associated with retirement such as stopping spend down and avoiding probate. In doing so we leverage strategic wealth management as well as retirement annuity designed to help accomplish those goals.

When searching for Fresno financial advisors, look no further than Soutas Financial & Insurance Solutions Inc. your Fresno financial advisor variety of insurance and investment strategies that focus on Asset Protection, Long-Term Care Strategies, Legacy Planning, Tax Efficient Strategies IRA, 401(k) & 403(b) Rollovers Life Insurance Annuities Medicare, we can help you develop an overall retirement income strategy specific to you and your family. We have a strong team of professionals helping ensure you receive all the assistance you need not only in developing your retirement income strategy, but in maintaining it throughout your retirement. Contact us today at 559-230-1648 or visit us today at Soutas Financial your top financial advisors in Fresno, Ca., to get your retirement plans on track for success!

Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Soutas Financial & Insurance Solutions, Inc. are not affiliated companies. California Insurance License # OK48173

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We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Soutas Financial & Insurance Solutions, Inc. are not affiliated companies. California Insurance License # OK48173. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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