High-income earners in Plantation face unique tax challenges. With higher incomes come higher tax liabilities, but strategic planning can help minimize the burden. Here are the top five tax planning strategies for Plantation’s professionals and business owners.
1. Maximize Retirement Contributions
- Why It’s Important: Contributions to 401(k)s, IRAs, and other retirement accounts reduce taxable income.
- Pro Tip: For high-income earners, consider a backdoor Roth IRA to bypass income limits on Roth contributions.
- Example: A Plantation couple contributed $40,000 to a Solo 401(k), saving $8,800 in federal taxes.
2. Defer Income When Possible
- How It Works: Defer year-end bonuses or use deferred compensation plans to push income into the following tax year.
- Pro Tip: Coordinate this strategy with your advisor to avoid AMT (Alternative Minimum Tax) issues.
3. Minimize Capital Gains Taxes
- Strategies: Utilize tax-loss harvesting or hold investments for over a year to qualify for long-term capital gains rates.
- Example: A Plantation investor offset $15,000 in gains by selling underperforming stocks.
4. Optimize Charitable Contributions
- Why It Matters: Charitable donations reduce taxable income.
- Advanced Tip: Donate appreciated assets, like stocks, to avoid capital gains taxes.
5. Consider a Donor-Advised Fund
- What It Is: A donor-advised fund allows you to make a large charitable donation now and decide later which charities receive the funds.
- Example: A Plantation resident used a $50,000 donation to offset a high-income year.
Conclusion:
Smart tax planning can significantly reduce your liabilities. Let Polaris Tax & Accounting help you implement these strategies. Visit our Plantation office today!