Who would ever have foreseen a time when petroleum companies would pay you to take their oil? This phenomenon underscores the concept that within every problem there is an opportunity. Here are some tax strategies to think about during the Coronavirus pandemic.
Now normally we are focused on helping businesses cut taxes and increase profits (did you know we are a Profit First Certified Master?) but we also know that in this time we need all the help we can get – personally and professionally.
If you have high balances in tax-deferred retirement accounts, consider rolling them into tax-free Roth accounts. Since you have to pay tax on the funds you convert, the lower value of the accounts means less tax is due. Plus if your income is lower, the tax hit will also be lower. The good news here is that growth in these funds when the economy recovers will now be tax-free!
Consider removing a dependent
Stimulus payments help most families with kids, except if they are over age 16. By removing them as a dependent and them filing their own tax return, they may be eligible for a $1,200 stimulus payment from the federal government.
Capture capital losses, then reinvest
Have a stock you like long-term, but it took a hit? Consider selling it, then repurchasing after 30 days. This will avoid the wash sale rules in the tax code. This technique can lower your cost and it can also be used to offset other investments you sell at a gain.
Time to buy or sell?
The value of real property of all kinds will be moving. Some will move up, some down. So now is a time to think about buying or selling. If you currently own property, don’t forget to look into the like-kind exchange rules to help defer any tax bite!
Leverage penalty-free withdrawals
You can now take up to $100,000 out of a retirement account and avoid the 10% early withdrawal penalty. Even better, the income tax on these withdrawals can be paid over three years and you can always repay the money over that same time period. There may be planning opportunities around this added flexibility, but only if you review your options and correctly use the funds.
It is more important than ever to keep up with rule changes and be on the lookout for tax strategies that will save you more money. Call if you wish to discuss your options – (208) 687-0508.
And if you a service business owner – know that we specialize in helping YOUR business succeed – less taxes (more tax strategies!), more profits, less stress!
PS – don’t forget the tax deadline was delayed until July!