Every year, I prepare returns for people who pay more state and federal income tax than is necessary. Let’s face it, most of us do not like to think about taxes until we have to file our tax returns. However, a little tax planning during the year can literally save hundreds, if not thousands of dollars at tax time. Here is my list of things you shouldn’t do without first talking about it with your tax advisor.
1. Don’t buy or sell any real property without knowing all the possible tax ramifications.
2. Similarly, the same is true for more non-real property, business, or investment assets.
3. Don’t mortgage, or refinance real property without knowing the potential tax benefits, or lack thereof.
4. Talk to your tax advisor before gifting or donating an interest in any major personal, investment, or business assets.
5. Don’t pay for your, or your dependent’s higher education without a tax consultation; in this case, timing is everything.
6. Consult your tax advisor before making any major retirement planning decisions.
7. Avoid taking early distributions from retirement accounts if at all possible. Doing so can be extremely expensive, and often there less costly alternatives in cases of emergencies.
8. Don’t get married or divorced without fully understanding the tax ramifications.
9. Talk to your tax advisor before starting, buying, or selling a business.
10. Similarly, choose a business entity type that best suits your tax, personal, and business needs.
Over the next several weeks, in separate blogs, I will discuss the importance of each of these decisions from a tax perspective. Stay tuned.