Thoughts, ideas, suggestions and education from financial adviser Jim Ludwick, Founder of MainStreet Financial Planning, Inc. of Odenton, MD; Washington, DC; New York City, and Santa Barbara, CA

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Monday, November 18, 2013

Plan Ahead. Did I say plan ahead?

October 15th has come and gone.  If that wasn’t an important date for you this year - congratulations.  Your lack of focus on October 15th probably means your 2012 taxes were not filed at the last minute deadline this year.  But look out.

Next year could be different.  That wonderfully misnamed “Taxpayer RELIEF Act of 2012”, actually passed and signed into law January 2, 2013, is waiting to surprise you.  A previous tome ridiculed the 1984ish naming of things (double speak) to mean something other than what it really is, but we can’t help ourselves from
pointing it out once again.

The point of this message is that now is the time to start learning and calculating your tax consequences for this year while you can still do something about them.  I hope you desire to reduce your taxes to the lowest allowed by law.  That’s going to take some work this year as a lot of rules and limits have changed.

So what can you do between now and the end of the year to lower your 2013 tax bite?  Here’s my three simple suggestions:

1.     Take your tax preparer out for breakfast or lunch.  Tell him or her you’d really like to pay the lowest amount possible this year and that you’d appreciate any suggestions.  If you don’t ask, you don’t get, my father frequently reminded me.   It applies here.

2.     Look at your taxable securities investments and see what your gain/loss position is at the moment.   Do you have any “carryover” losses from last year?  Could you sell something now at a loss and buy it back 31 days later to offset some gain you might recognize if you sold one of your big winners and then bought it back again.  This is a technique we call raising your basis, or increasing the number that you have to report to the IRS as your purchase price.  Sound confusing? Well, a short reminder that your author gives advice by the hour on this particular topic.

3.     Charitable gifts.  How about gifting some stock or mutal funds to your church or other favorite charity?  Instead of giving cash, giving appreciated stock helps you avoid the capital gains tax and moves your tax bill slightly lower versus gifting cash and then claiming a deduction.

So there you go.  Wake up and take some action today.  It will be 2014 before you know it and one of these ideas takes you 31 days or longer to fully implement. Get moving.


Are you planning ahead this year? Comments?

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