How to Maximize Next Year’s Tax Return

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If you want to reduce the amount of money you owe the government, you’ll want to learn how to assess your financial situation from a tax perspective. An expert in tax preparation in Pembroke Pines can help you take stock of the money you’ve made and identify the financial choices that can give you a favorable tax treatment next year.

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Tax Planning Tips You Should Know

Convert Traditional IRAs Into Roth IRAs

If you want to take advantage of lower current tax rates, you’ll want to convert traditional IRAs into Roth IRAs. Aside from the fact that Roth IRA doesn’t require minimum distributions when you reach the age of 72, the distributions aren’t taxed when you make a withdrawal in retirement.

Before you process your Roth conversion, you should figure out where you lie within your tax bracket. If you’re on the lower end of your current bracket, you’ll have enough room to make a Roth conversion without getting pushed into the next tax bracket.

It’s important to note that starting in 2021, limits are set on the amount of business losses claimed. If you’re a business owner who experienced business losses due to the pandemic, you’ll want to make a Roth conversion this year so that you can net the business loss against the Roth conversion.

Use Your Estate Tax Exemption

Unless Congress takes action, estate tax exemptions automatically decrease from $11.7 million to $5.49 million. Gift assets to your children or into a trust this year so that you can use the exemption. If you own a sizable estate, you’ll want to start planning your gifting strategy now.

Set Up a Retirement Account for Your Business

If you’re a proud owner of a small business, consider setting up a SEP-IRA. This retirement savings plan allows you to contribute to traditional IRAs set up for your employees and yourself. Since your contributions are deducted before you calculate your Adjusted Gross Income (AGI), you’ll lower your tax bill.

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Do You Need Help with Tax Preparation in Pembroke Pines?

At Tax CPA 1, we’re committed to providing high-quality service for what our clients want, need, and deserve. Besides filing your taxes, we’ll help you maximize your income. Contact us today!