Tax Notes for April 15th

With the annual deadline to file your income taxes a mere hours away, there is little you can do to have an impact on your 2014 return. However, in the spirit of the season, I thought I’d offer a few things to think about, or (better yet) take action about to have an impact on next year’s tax return.

Retirement Planning

With regard to retirement planning, there are several points of interest with relation to tax planning.

• Maximizing contributions to your employer-sponsored retirement plan. Employer-sponsored plans offer the largest pre-tax contribution limits and often carry an employer matching contribution. Maximizing the allowable contributions to these plans is a great way to reduce income tax liabilities today, while saving for your retirement.

• For the business owner and self-employed, consider establishing a small business retirement plan. SEP’s, SIMPLE’s, Individual 401k’s to name a couple. There are several options available to you that will allow you to save for your retirement and take a substantial tax deduction based on your contribution. Contact me if you’d like to discuss which option would work best for your situations.

• Look into maximizing contributions to either a Traditional IRA or a Roth, depending on your eligibility. A couple of key eligibility factors are income level and whether or not you’re covered under an employer-sponsored plan. Contact me to discuss.

Investing/Saving

• Look at your 1099’s. How much of your interest income could be shifted to tax free interest through investment in municipal securities? Do municipal securities make sense for you? How much tax are your paying on your interest income, how much would you have made in tax free municipals?

• How tax efficient is your investment strategy? Are there alternatives that would help you keep more of what you’ve earned? Are you considering tax ramifications as a factor when making

investment decisions. I often tell clients that you can’t let taxes dictate your financial decisions. This does not mean that you ignore tax ramifications, rather that they be considered as one factor, not the only factor.

• Fees/Commissions. Are you paying brokerage commissions? Investment advisory fees are tax deductible. Brokerage commissions are not. In addition to the several other merits of fee-only investment advice, the ability to take a tax deduction for your expenses can be a great reason to work with an investment advisor as opposed to a traditional brokerage firm for your investments. I’d be happy to share with you the many other benefits, but not in the scope of this blog post.

Just a couple of thoughts on things you can be considering now to make next April 15th a little less painful. I often find that this time of year can be a great time to re-evaluate your circumstances and make the changes now that could have substantial impact on your 2015 tax return and on tax returns for years to come.