Michael Atias
Online Trading Academy
Holiday season is officially here! This means that taxpayers should recognize that we’re just a few weeks away from the end of the 2018 calendar year. In other words, you are running out of time to reduce your tax liability come April.
What Is the Secret to Reducing Your Tax Liability?
In two words, Tax Planning.
The purpose of tax planning is to ensure tax efficiency. Or, in laymen’s terms, to make sure you pay less taxes.
Tax planning covers several considerations. These considerations include the timing of income, size and timing of purchases or other expenditures, the selection of investments and types of retirement plans that need to complement the tax filing status and deductions to create the best possible outcome.
Who Should Do Tax Planning?
If you pay taxes, you should do tax planning. Many think that tax planning is reserved only for affluent taxpayers, but this couldn’t be further than the truth. In my experience, all taxpayers can benefit from building a tax plan and monitoring it periodically. This is arguably the best way to reduce your tax liability in a consistent manner.
What does a good Tax Planner do?
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A good Tax Planner asks the taxpayer many questions, analyzing the taxpayer’s situation in order to evaluate the taxpayer’s financial goals.
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A good Tax Planner then offers effective tax solutions.
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A good Tax Planner will closely monitor the status of the taxpayer and the changes in the tax code over time to make sure the plan set forth is still the most effective plan to reduce the taxpayer’s tax liability.
I would like to share with you a recent consult I had with one of our students, we’ll call him David.
David started the conversation by letting me know he is currently unemployed and considers himself to be semi-retired as he is 69 years old and not expecting to get any job offers soon. I, naturally, asked David about his source of income. Each question; are you collecting social security?, what about a pension?, rental income?, consulting income?, came back with the same reply, “No”. David informed me that he had no taxable income for the last 2 years and that he has been living off his savings since his wife passed away after dealing with a terrible illness.
At first glance it seemed as if there was nothing I could do to help David. I mean, the guy has had no taxable income and no tax liability for the last two years. However, I kept asking questions, kept looking for tax planning opportunities, and that paid off.
It turns out that David received many stock options over the years from his previous employer and that currently he has over $1,000,000 in long term capital gains. He also shared that he has about $350,000 in IRA funds and that he is eligible to receive a $3500 monthly benefit from social security.
Armed with this information, I immediately suggested that David should liquidate some of his long-term capital gain position (at least $50,000), so he could take advantage of the 0% long-term capital gain he is eligible for in 2018. This is important for him going into 2019, because next year he will have more than $40,000 in social security income, he may need to take the Required Minimum Distribution from his IRA as he turns 70 ½ and that next year he will no longer qualify for the 0% long-term capital gain rate.
This tax planning strategy will save David more than $10,000 in tax liability! Needless to say, David was quite happy. How many of you would like to make $10,000 or more in one phone call? How many of you would like to make $10,000 or more in one hour just by talking to a tax professional?
We also talked about future tax planning opportunities in years to come, such as what amounts David should withdraw from his IRA, how David should structure his trading business and other ideas. David could potentially save tens of thousands of dollars in the upcoming few years by implementing a few tax saving strategies.
I hope the story I shared with you shows you that really ANYONE can benefit from tax planning. So, what are you waiting for? Schedule a tax planning session and see if you can save some money as well. At this time of year, we could all use a few extra dollars to help pay for all the upcoming holiday expenditures. Happy holiday season to all and may it be a blessed time of year.
Read the original article here - The Secret to Reducing Your Tax Liability
This content is intended to provide educational information only. This information should not be construed as individual or customized legal, tax, financial or investment services. As each individual's situation is unique, a qualified professional should be consulted before making legal, tax, financial and investment decisions. The educational information provided in this article does not comprise any course or a part of any course that may be used as an educational credit for any certification purpose and will not prepare any User to be accredited for any licenses in any industry and will not prepare any User to get a job. Reproduced by permission from OTAcademy.com click here for Terms of Use: https://www.otacademy.com/about/terms
Editors’ Picks
EUR/USD holds losses near 1.1850 as US, China holidays keep trade muted
EUR/USD opens the week on a softer note, trading near 1.1860 during the Asian session on Monday. Activity is likely to remain muted, with United States markets closed for the Presidents’ Day holiday, while Mainland China is also shut for the week-long Lunar New Year break.
GBP/USD flat lines as traders await key UK macro data and FOMC minutes
The GBP/USD pair kicks off a new week on a subdued note and oscillates in a narrow range, just below mid-1.3600s, during the Asian session. Moreover, the mixed fundamental backdrop warrants some caution for aggressive traders as the market focus now shifts to this week's important releases from the UK and the US.
USD/JPY stays firm around 153.00 after Japan's Q4 GDP miss
USD/JPY kicks off the new week on a positive note as Japan's weak Q4 GDP growth tempers bets for an immediate BoJ rate hike and undermines the Japanese Yen. Investors, however, seem convinced that the BoJ will stick to its policy normalization path amid hopes that PM Takaichi's policies will boost the Japanese economy. In contrast, cooling US consumer inflation reaffirmed bets for more Fed rate cuts in 2026, which acts as a headwind for the US Dollar and should cap the currency pair.
Editors’ Picks
AUD/USD defends gains below 0.7100 amid the Fed-RBA divergence
AUD/USD attracts some dip-buyers near mid-0.7000s during the Asian session on Monday, stalling last week's modest pullback from a three-year peak. The US Dollar continues with its struggle to attract any meaningful buyers amid bets for further rate cuts by the Fed, bolstered by the softer US CPI report on Friday. In contrast, the Australian Dollar retains a bullish bias on the back of the RBA's hawkish stance, which further acts as a tailwind for the currency pair.
USD/JPY stays firm around 153.00 after Japan's Q4 GDP miss
USD/JPY kicks off the new week on a positive note as Japan's weak Q4 GDP growth tempers bets for an immediate BoJ rate hike and undermines the Japanese Yen. Investors, however, seem convinced that the BoJ will stick to its policy normalization path amid hopes that PM Takaichi's policies will boost the Japanese economy. In contrast, cooling US consumer inflation reaffirmed bets for more Fed rate cuts in 2026, which acts as a headwind for the US Dollar and should cap the currency pair.
Gold remains below $5,050 despite Fed rate cut bets, uncertain geopolitical tensions
Gold edges lower after registering over 2% gains in the previous session, trading around $5,030 per troy ounce during the Asian hours on Monday. However, the non-interest-bearing Gold could further gain ground following softer January Consumer Price Index figures, which reinforced expectations that the Federal Reserve could cut rates later this year.
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Meme coins such as Dogecoin and Bonk, alongside the privacy coin Zcash (ZEC), are leading the broader market losses over the last 24 hours. DOGE, ZEC, and BONK ended their three consecutive days of recovery with a sudden decline on Sunday, as crucial resistance levels capped the gains. Technically, the altcoins show downside risk, starting the week under pressure.
Global inflation watch: Signs of cooling services inflation
Realized inflation landed close to expectations in January, as negative base effects weighed on the annual rates. Remaining sticky inflation is largely explained by services, while tariff-driven goods inflation remains limited even in the US.
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