Northeast Financial Strategies: A Focus on Tax Strategies

Taxes and inflation erode the return you make on your investment portfolio. If you are in a 30% tax bracket and inflation is 4%, you need to earn 5.7% to earn nothing.

Any effective plan to minimize your income taxes requires an ongoing effort. That means you plan and make adjustments year-round, not just when you fill out your tax forms. Most tax preparers are just scorekeepers. They are reactive rather than proactive. You should work with a firm throughout the year, not just 1 time a year.

There are three broad categories of tax-favored investments that reduce your income taxes. These are: Tax-Exempt, which offers income that is not taxed by the federal government; Tax Deferred, which defers taxes on accumulation until it is withdrawn; and Tax Advantaged instruments, which provide a tax credit against taxes.

Municipal bonds and Tax Free Money Market funds are two types of tax exempt vehicles.

The most popular tax-deferred investments are 401k plans, and traditional and Roth IRA’s. Other tax-deferred alternatives are annuities, life insurance, and individuals stocks and stock mutual funds.

Tax advantaged alternatives shelter income from taxes by creating a tax credit. The 3 primary Tax advantaged vehicles are: Rental Real Estate, Low Income Housing and Historic Rehabilitation Properties.

Old annuity and life insurance contracts can be exchanged for newer, higher paying interest contracts by using a 1035 exchange. This IRS section allows you to reposition these investments without incurring any tax liability.

The new tax law allows married couples to exclude up to $500,000 of capital gains on the sale of their home. This benefit can be used every two years.

There are numerous options available for all of these devices and a professional should assist you in selecting one that properly fits your specific needs.

We are a total financial planning firm that has been helping people solve their financial needs for 25 years. We would welcome the opportunity to assist you in minimizing your income taxes and maximizing your investment return. Our tax service offers our unique Refer-A-Friend Program  where you can receive $10 for every friend you refer to have his or her tax return completed by us.

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