Investment Tax Advice…Five Moves to Make Now

By Dr. Steve Sjuggerud President, Investment U
Monday, December 6, 2004: Issue #392

What’s the safest thing you can do for the highest return on investment? That’s easy And it’s number one on this investment tax advice briefing of moves you should make now.

It is getting to be that time. So today I wanted to give you the quickest, shortest letter possible that reminds you of the things you know you need to do to maximize your wealth.

Go through this list, and commit to getting these things done. Few investments can beat the return you can give yourself by doing these simple things.

Investment Tax Advice Moves To Make Now:

1. Stuff your retirement accounts to the gills.

This is free money. If you put $3,500 in a retirement account, and you’re in a 28% tax bracket, you automatically save yourself $980 in taxes. If you put 10 times that into a SEP (if you’re self-employed and in the same bracket), you save yourself $9,800 in taxes.

The choice is simple give the $9,800 to the government now, or save it for your future. It’s a no-brainer. One down, four to go

2. Cut your losers now.

Cut your losers, let your winners ride it’s what works in investing. I “preach” this every week. Not only is cutting your losses the path to generating wealth over the long run, it can save you money in taxes too.

You have every reason to dump those dogs in your portfolio now. If you sell by year end, you can use those losses to offset any gains, wiping out any taxes you might owe. And after that, you can even apply up to $3,000 of losses to offset your income. Get rid of those losers now! Do it!

3. Give stuff away NOW.

The laws are changing in 2005. So don’t wait, give stuff away this year.

For example, starting in 2005, if you give away a car, the value you can deduct will be very specific: Your tax deduction will be limited to the charity’s actual proceeds from selling the car. The “old” rules for determining the “fair market value” are much looser. In short, if you were thinking about donating a car, do it in the next few weeks!

4. Spend down your FSA if you have one

This admittedly is not a big one. But Flexible Spending Accounts (FSAs) are “use it or lose it.” So if you’ve got money there, USE IT! Schedule checkups, buy new glasses and get your teeth cleaned in the next few weeks. Whatever, but spend it down, don’t throw your money away.

5. Give appreciated stock (or other assets)

You can gift up to $11,000 per person ($22,000 if married) per individual annually. One option is to give to benefit older children already in college, as cash payments made directly to a college are GIFT-TAX FREE and reduce the value of your taxable estate. Similar medical payment gifts made directly to the doctor are also GIFT-TAX FREE.

Giving stock allows you to take a deduction for the fair market value of the asset AND escape the tax on the long-term capital gain of a stock. So if you bought a stock for $1,000, and it’s now worth $10,000, if you give it away to charity, you don’t have to pay tax on the $9,000 in capital gains.

You get the idea. The very best investment tax advice can simply be making the right tax moves like stuffing your retirement account to save you $9,800 or more in taxes.

This was a general list, of course a reminder of the simple things you can do to maximize your wealth. Get a piece of paper out, and figure out what you can do now, tax-wise, to maximize your wealth.

Good investing,

Steve

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