Profitable Lessons from a Tax Return
Before filing away your 2017 tax return, ask yourself if you can learn a few lessons — and possibly make 2018 a better year financially.
Did I receive a large refund? If so, you made an interest-free loan to the IRS. Ask your tax adviser to calculate the amount you need to pay in withholding and/or estimated tax payments to avoid any penalty. This is especially important since tax rates have dropped for 2018.
Do I have significant capital gains or losses? Even in a bull market there are stock losers. Offset some capital gains by selling shares that have dropped in value. And remember: You can give appreciated stock held more than one year to charity and avoid all capital gains while also qualifying for an income tax charitable deduction.
Should I add municipal bonds to my portfolio? Although the return on municipal bonds is generally lower than that on commercial bonds, the tax-free income may make them an attractive investment, particularly if you are in a high tax bracket. For example, a municipal bond paying 3% is equivalent to a 4.6% taxable return for a taxpayer in the 35% tax bracket. There may also be state tax savings.
Are my investments producing more income than I need — or want? By making a gift of income-producing assets, you can shift the income to family members in lower tax brackets. You can give up to $15,000 free of gift tax in 2018 ($30,000 for married couples). Or you can give the assets to charity and also reap an income tax charitable deduction if you itemize.
The information in the website is not intended as legal advice. For legal advice, please consult an attorney. Figures cited in examples are for hypothetical purposes only and are subject to change. References to income tax apply to federal taxes only. Federal estate tax, state income/estate taxes or state law may impact your results.