Taxes

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Congress Finalizing Tax Reform Bill

The U.S. House and Senate have each passed different tax reform bills and are working together to reconcile the differences. The goal is to deliver a final tax reform bill to the president before Christmas.

“Both bills are big improvements to America’s out-of-date tax code,” wrote Adam Michel, a policy analyst for the Heritage Foundation, in a recent article comparing the two packages. “Both bills cut taxes for individuals and businesses, largely repeal the state and local tax deduction, and allow businesses to invest more in the American economy through temporary expensing.”

Though nothing has been finalized as of this writing, a common theme seems to be allowing fewer itemized deductions for individuals and to balance that by increasing standard deduction amounts. For example, the personal exemption of $4,050 for income taxes would be eliminated and offset with a higher standard deduction of $12,000 for individuals and $24,000 for married couples. (The current standard income tax deduction is about half that – $6,350 for individuals and $12,700 for married couples.) Deductions for state and local income and sales taxes (SALT) will likely be capped at $10,000. In contrast, the child tax credit is expected to increase from $1,000 currently to $1,600 or more.

In anticipation of potential changes, those who typically itemize on their income tax returns may want to consider accelerating deductible expenses in 2017. For example, they could pay second-half property taxes and/or make a January mortgage payment before year-end. They could also make their fourth-quarter estimated state income tax payment by year-end.

By |December 18th, 2017|Current Affairs, Taxes|

Year-End Tax Saving Strategies

Lupe Camargo, financial plannerNow is a perfect time to check for any remaining opportunities to help minimize your tax bill before 2017 comes to a close. There are many year-end tax saving strategies for you to consider.

At Perspective Financial Services, we take a proactive approach to minimize our clients’ tax bills through a variety of investment strategies. Selling a security in a taxable account at a loss and replacing it with another security of the same asset class can help offset some of your capital gains tax; this is referred to as tax loss harvesting. We also research mutual funds that may generate a capital gains distribution before making end of year purchases; this helps avoid unnecessary capital gains taxes on new investments.

There are additional things you can do, with the help of your financial planner. Here is a checklist of things to think about.

When possible be proactive about the timing of your income. This can make a significant impact on your tax bill.

  • Defer a bonus or a sale of appreciated property to the following year when it becomes advantageous to avoid the income this year.
  • Pay expenses this year, such as fourth quarter state income taxes or medical expenses. This helps especially when next year’s income will be less than this year.
  • Increase your federal income tax withholding to soften the blow of a significant tax bill.

Take advantage of the vehicles that not only help you plan for the future, but give the added bonus of reducing your income taxes.

  • Max out your IRA contributions, and take advantage of the catch-up if you are over 50 years old.
  • If you are over 70 1/2 years old, or you have an inherited IRA, do not forget to take your required minimum distribution. The penalties are very steep if you do not.

If you are planning to gift money to family or charities, do so before the end of the year.

  • Give $14,000 per individual annually in federal tax-free gifts.
  • Make planned charitable contributions and take advantage of the charitable rollover provision if you are over 70 1/2 years of age.
By |December 4th, 2017|Advisors, Charitable Giving, Taxes|

Arizona Tax Credits Help the Community

Arizona tax credits help the community through programs like PetSmart Charities emergencyNovember 29 is Giving Tuesday this year, Arizonans who pay state income tax have a unique and easy opportunity to give by directing where some of those dollars are spent. Arizona tax credits help the community. The state offers a number of dollar-for-dollar credits you can specify on your income-tax return to benefit schools, registered charitable organizations and military families.

  • Public schools: You can donate up to $400 married ($200 for singles) to any public or charter school in Arizona for after-school activities. Effective in 2016, donations can be made up to April 15 of the next year (Use Form 322).
  • Private school tuition organizations: You can give up to $1,090 married ($545 single) to a tuition organization that awards scholarships for children in Arizona private schools (Form 323). If you wish to donate more than the Form 323 maximum, you can give up to another $1,083 married ($542 single), but this must be claimed on Form 348. Donations can be made up to April 15 of the next year. Click here for more information.
  • Qualified Charitable Organization (formerly Working Poor): You can donate up to $800 married ($400 single) to any Arizona-registered charity that helps the poor (Form 321, organization must be approved by the Department of Revenue). You must also itemize your deductions on your Arizona form to claim this credit. Effective in 2016, donations can be made up to April 15 of the next year. Click here for more information.
  • Military family relief: You can contribute $400 married ($200 single) to benefit Arizona service members and their families. The assistance goes to those who are deployed or to the families of those injured or killed. The credit is capped at $1 million annually so it’s important to get this money in as early as possible. Any money received after $1 million is reached (usually sometime in December) is returned (Use Form 340). Click here for more information. 
By |November 29th, 2016|Charitable Giving, Taxes|

Tax Loss Harvesting for Fall

Eng-WEBAs the weather cools and seasons change from summer to fall, farmers are looking to harvest. Much like the farmer, we at Perspective Financial are turning our thoughts to harvesting – from a financial perspective. Tax loss harvesting, capital gains distributions and required minimum distributions (RMDs) from IRAs are areas of tax planning we review and monitor for our clients throughout the year. During the fourth quarter, we pay particular attention to how these aspects of their portfolios may impact their individual tax situations.


The practice of selling a security that has experienced a loss is called tax loss harvesting.


By realizing (or “harvesting”) a loss, investors are able to offset taxes on both gains and income. The sold security is replaced, at lower cost by a similar one, while maintaining the investor’s asset allocation. We were able to do some tax loss harvesting earlier this year when the markets were very volatile and weak, where it was appropriate for clients with taxable accounts. We continue to look for such opportunities as the year comes to a close.

By |October 10th, 2016|Financial Planning, Investing, Taxes|