His vision for starting GWS was to deliver investment strategies and wealth management services typically available at the highest levels of wealth. Today, clients benefit from these sophisticated financial services targeted to meet their unique needs.
The holidays are the perfect time to save money. I’m not talking about Black Friday deals or December super sales. It’s the season to save on your 2014 taxes before we ring in the New Year.
Here’s the top 10 ways you can save on your taxes:
#10. Offset gains with losses:
You may have losses to utilize where you least expect it. That bond fund that has made you money because of reinvested dividends, may, in-fact have a tax loss. How so? Because each and every reinvested dividend increased your tax basis. Take a closer look at these investments and their current basis and consider taking the loss to offset another gain in your portfolio.
#9. Consider any capital gains:
Know whether the mutual funds you own will have capital gain distributions. We spend a lot of time calling fund companies to prepare for these distributions, but individual investors can find this information online from each fund website.
If the gains are significant, consider selling the fund before these are distributed or at least hold off on new purchases until after they are made.
#8. Know your annual gifting limit when giving money to family and friends:
If you plan to give a larger gift of cash to someone or several people, you can transfer up to $14,000 per person without incurring gift taxes or having to file a special tax reporting form.
#7. Defer or accelerate income:
If you know that your income will change this year to next, there are some planning opportunities.
If your income is set to decrease because of an event like retirement, and you anticipate that your income in future years will be much less, use the higher income tax bracket this year as an opportunity to donate more to charity. If you’re not quite ready to choose the charities, use a Donor-Advised Fund which will allow you to take the large deduction this year at a higher tax bracket and direct the funds to your charities in the future.
If you started a business or have had little or no income, but expect it to rise next year and into the future, consider using the temporary lower tax bracket to your advantage by converting an IRA to a Roth. You may pay little or no tax due to the low income, yet enjoy tax-free growth and avoid Required Minimum Distributions (RMDs) later on.
#6. Had a windfall year? Consider pre-paying state taxes:
For those who have investment income, or experience a windfall income year, tax withholding can be tricky, and payment timing strategies can potentially yield some significant tax savings. For those in the DC metro area, state income tax can be significant. Paying state taxes in the year the income was earned rather than deferring until the state tax deadline the next year, could potentially save thousands of dollars. To learn more, read The Best Tax Strategies for a Windfall Year.
#5. Consider a Roth 401(k)
Most companies don’t announce the addition of a Roth 401k to their plan lineup with balloons and streamers, but if your employer added one, it may be an opportunity to save in a different way.
According to Aon Hewitt’s 2013 Trends and Experience in Defined Contribution Plans survey, today 50% of employer plans allow Roth contributions, up from 11% in 2007, but only 9.6% of eligible employees elect to save in a Roth.
If you have the Roth option, you can contribute to both the traditional 401(k) and the Roth, or, if your plan allows conversions, you can convert to a Roth if you think your tax bracket will be higher in the future.
#4. Donate appreciated assets rather than cash:
Sometimes it makes sense to donate by simply writing a check, and other times it’s a better idea to complete those gifts using appreciated assets. To learn more about how this works, you can read the article we recently wrote on Tax-Smart Ways to Give to a Charity.
#3. Max out your 401k catch up contributions:
If you’re over 50, you can contribute an extra $5,500 to your qualified retirement plan this year. (It steps up to $6,000 in 2015.) Consider making extra contributions from your paychecks before December 31.
#2. Open an Individual-K if you are self-employed:
An Individual-K is basically a personal 401k and profit-sharing plan for those who are self-employed allowing the participant to defer up to $52,000 in 2014 depending on income. ($57,500 if you are over 50.)
#1. Review your portfolio for tax-efficiency:
To achieve the highest after-tax return consider using index funds where appropriate and select tax-efficient fund managers. Morningstar.com offers free information showing fees, turnover percentages and tax cost efficiency for every mutual fund managers. Even better, they calculate tax-adjusted returns showing just how much of the returns, net of taxes, you would have kept historically.