Effective tax planning is one of the most important aspects of retirement and estate planning. It seems taxes are everywhere these days, and there are five main types of taxes: Income Taxes, Estate Taxes, Inheritance Taxes, Social Security Taxes and Dividend and Capital Gain Taxes. With the likelihood that tax rates will be increasing across the board in the very near future, tax planning is critical and it is imperitve to do some type of tax management planning . We work very hard and proactively with our clients each and every year to find ways to make strategic, tax efficient moves to get money into more tax efficient and/or tax free vehicles.
Fortunately, tax management planning is legal, and we want our clients to pay the least amount of taxes as possible by law. Each specific type of tax has some special designed strategies to effectively control the tax. Here are a few areas we work with our clients on to become as tax efficient as possible:
> Income Taxes - We compare incomes for the year with the current tax brackets to see if there is any room left in a current low bracket to tax advantage of. For example, if you have $20,000 of room left in the 15% bracket, we may want to take advantage of that room to get taxes paid on money that will eventually be taxed at 15% instead of a higher rate later.
> Social Security Taxes - Social Security is only taxed if you have certain types of other income and if that income is above certain levels. We explain to our clients the way Social Security taxes work and help you eliminate or reduce these taxes if possible. There may be strategic moves you can make to have the same or more income without paying tax on your Social Security income.
> Estate Taxes - Estate taxes come into play if your estate is above a certain level in the year that you pass away. These taxes can cause families to pass on less than half of their estate to their heirs, which generally is not what they had in mind. There are ways to help reduce or eliminate estate taxes if proper planning is done. The proper use of the right legal documents and other financial tools is used here.
Remember, the more tax efficient that you are the more wealthy your are. A dollar saved in taxes is an extra dollar in your pocket.