Everybody understands that there are right things, wrong things, smart things, and not-so-smart things you can do when filing your taxes. For the most part, keeping the job of the IRS as simple as possible is a golden rule of avoiding audits. Here at the Greenburg Financial Group, we offer investment advice and consultation, portfolio management, portfolio advisory, and education services. Because investors and business people tend to have unusually complex returns, they tend to need the most help. But this year, with big political changes afoot, and COVID relief adding in additional complexity, everyone could use a few pointers. We asked some of our top consultants what they think are some important pointers for filers of every stripe in 2021. Here’s what we came up with.
You might notice a common thread among these tips in the form of squirreling away your nuts for future winters. Investment and financing professionals are dealing with a high level of uncertainty over the next few years, especially when it comes to inflation. So it’s a good idea to turn your savings into something you can count on, like gold, oil, and the following ideas.
For most retirement plans the payments you make to your account are at least partially protected. Roth accounts offer many benefits, but contributions aren’t completely tax-free. With most plans, taxes only come out at the time of withdrawing the money, and the longer you wait to withdraw, the less the IRS gets involved.
Using your health savings account, you can set funds aside for medical expenditures that can be used right away, should the need arise, or that can be invested. Like a 401(k) and IRA, contributions to your HSA are made with “pre-tax” dollars. This means the IRS cannot tax it, similarly to retirement plans. Eligibility depends on your health insurance, so you should consult your insurance provider first.
For those who are not eligible for an HSA, a flexible savings account is a comparable option. An FSA allows you to apportion tax-free dollars to pay for the healthcare costs for dependent children and families.
Anyone who commutes to work (no, walking from your bed to your home office doesn’t count) is eligible for write-offs on expenses associated with such travel. After all, it is a business expense. This year, filers can assign as much as $270 a month as commuter expenses. To make things even better, the limits are the same as they were last year. That means advisors will have more experience with how these types of write-offs work.
When selling investments for more than you paid, the profit is taxable. However, the longer you hold onto them, the less the profit can be taxed proportionally. So holding onto investments for at least 366 days is the way to get the most out of them.
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