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You don’t want to pay more in federal income tax than you have to. With that in mind, here are things to consider when it comes to keeping more of your income.
By deferring income to a later year, you may be able to minimize your income tax liability and invest the money that you’d otherwise use to pay income taxes.
Certain retirement plans can help you postpone the payment of taxes on your earned income. With a traditional 401(k) plan, you contribute part of your salary into the plan, paying income tax only when you later withdraw money from the plan.
There are many other ways to postpone your taxable income: you can contribute to a traditional IRA, buy permanent life insurance, or invest in certain savings bonds.
You may also be able to minimize your federal income taxes by shifting some income to family members who are in a lower tax bracket. For example, if you own stock that produces dividend income, one option might be to gift the stock to your children.
However, look out for the kiddie tax rules. Under these rules, for children under age 18, or children under age 19 (or full-time students under age 24) who don’t earn more than one-half of their financial support, any unearned income over a certain limit is taxed at the parents’ tax rates.
You can also minimize tax by making tax-conscious investment choices. Potential strategies can include the use of tax-exempt securities and intentionally timing the sale of capital assets for maximum tax benefit.
Although income is generally taxable, certain investments generate income that’s exempt from tax at the federal or state level.
Note: You should not decide which investment options are appropriate for you based on tax considerations alone. Nor should you decide when (or if) to sell an asset solely based on the tax consequence.
A tax professional can help you decide what choices are right for your specific situation.
In addition to a tax professional, your financial advisor, available to you through Arsenal Credit Union can help you plan your retirement based on your goals and your personal picture.
As a member of Arsenal Credit Union you have access to David Weis, our knowledgeable Financial Advisor available through our broker-dealer CUSO Financial Services, LP (CFS)*.
Conquer your retirement resolution with a no-cost, no-obligation appointment today! If you have questions, please call David at 314.919.1058, email him at firstname.lastname@example.org or visit his website.
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*Non-deposit investment products and services are offered through CUSO Financial Services, L..P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.