3 Tips for Optimizing Your Tax Position

Building wealth can be challenging, even when you’ve got the income to devote consistent capital to the best opportunities out there for individual investors. There are a lot of conflicting sources of advice, and the tools that are designed to help you can be confusing sometimes. That’s why it is a good idea to have help along the way. Unfortunately, finding the right financial professional to meet your needs as your portfolio grows and you move through different phases of life can be difficult. Wealth management? Financial planning? Each offers different resources. One place you can’t go wrong is to start by making sure you are paying the right amount in taxes and not over-paying because you missed opportunities, though. Of course, optimizing your tax position is an ongoing affair when your income changes year to year with your investment performance and advancement in your career, so it’s a process and not a one-time event. Here are three tips for keeping on top of it.

1. Hire Help Early

Doing your taxes when you have significant investments and assets can be hard. Which accounts are tax free? Which new deductions and exemptions do you qualify for? Which other forms of tax can be deducted from your income taxes? These are the questions that professionals like the people at Summitry are trained to help with. Hiring a tax professional to do your returns is only half effective if they are brought in at the end of the process, though. Your best bet is to hire ongoing help early, so you can get advice about financial planning and investment decisions as you make them. When you work with tax planners who make it their specialty, you get the insight you need to understand how each of your financial decisions through the year might impact your year-end taxes.

2. Track Everything

Most people who own a business or work for themselves already know that tracking everything is the key to finding all your deductions and cost-saving credits and exemptions. The same goes for complex individual tax returns when you have a lot of investment income or when you’re in a profession that requires you to incur significant expenses of your own, like some sales jobs. When you have a good record of your expenses and the purposes you put the money toward, it’s easier to find all the qualified deductions. This is especially true when you do a lot of charitable giving, and most people do more giving than they realize. If your tax planner has more data to work with, then you can get better advice.

3. Consider Using a Trust

It doesn’t take a lot of wealth to trigger inheritance taxes these days, so a trust is starting to make sense for a wider range of people. Look into how it can help you plan your estate, but also consider whether there are any provisions that make it a good idea to get into sooner than later. A trust can help you when it comes to providing for a child’s education or for many other situations where you’re facing a large transfer of wealth that could trigger tax implications for yourself or the recipient.

  • Set conditions for the use of your wealth in the event you are incapacitated
  • Sidestep probate
  • Provide for minor grandchildren
  • Care for a family member with special needs

Finding the right help with your taxes means knowing when these resources would be best deployed, both for your benefit and that of the trust’s beneficiary. When you work with full-service financial planning and management professionals to optimize your taxes, you also have the option to add services as you need them, including full wealth management.

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