Taking steps to review one tax strategy before the end of the year can be beneficial for many New York residents. According to a recent article, taking certain steps might reduce the tax burden an individual might face by when it is time to file returns in April.
The article suggests that taking time to plan an review investments might be beneficial. For example, a good strategy might involve selling stocks that are doing well to keep the gains locked in. The taxes levied against the gains may be offset if investments that have suffered losses are sold as well. The sale of depreciated shares may provide tax benefits that protect against the burden imposed on capital gains and regular income.
After reviewing one's finances, a person might find that they are able to contribute more to plans that are provided with tax incentives. For example, a person might increase the amount of income that is being transferred into a 401(k) or an individual retirement account.
One might also consider charitable giving and the associated tax advantages. In order to maximize the benefit to both parties, a person who is making a charitable donation might transfer ownership of an investment to a qualifying organization. This protects the value of the stock by negating taxes levied on gains because the charity may not be required to pay income taxes that would be levied against the individual. The transfer of ownership also provides tax deductions to the person who gives the donation.
Reviewing one's tax strategies early might also help a person avoid tax disputes. However, tax codes may be complex and difficult to navigate without professional assistance. Individuals and business might benefit from consulting with an attorney who is familiar with tax law.
Source: FOX Business, "Fall Means it's Time to Hit the (Tax) Books", Linda Stern, September 12, 2014