Deferral of Income
Another tax tip to help reduce tax liability in a given tax year, is the deferral of income, interest and investment gains. By deferring earned income or taxable interest and investment gains from the current year into the following year, you can reduce your taxable income base. The taxpayer might have had a high earning year in the current year and expects the upcoming year to be much less, so any type of income deferral would be helpful in this scenario.

Tips to defer taxable income to the next year:
  • Realize taxable investment gain in the following year, take losses now
  • Buy Treasury bills that come due next year (interest pays at maturity)
  • Defer employer compensation
  • Buy I bonds or Series EE bonds (interest pays when bond is cashed)
  • Invest in tax deferred accounts (IRA, Roth, annuities, etc…)
  • Buy investments that pay tax-exempt interest (public muni bonds)
  • Invest in savings certificates after June 30 with maturities of six to 18 months
  • Utilize tax-free exchanges


Intra-Family Transfers

Related Articles
  1. Markets

    What Taxable Interest Must Bond Investors Report?

    Many factors impact the amount of taxable interest bond investors must report.
  2. Retirement

    How Non-Qualified Deferred Compensation Plans Work

    These tax-advantaged retirement savings plans have their pros and cons, and employers and employees must follow strict guidelines.
  3. Investing

    Deferred Tax Liability

    Deferred tax liability is a tax that has been assessed or is due for the current period, but has not yet been paid. The deferral arises because of timing differences between the accrual of the ...
  4. Retirement

    How Non-Qualified Deferred Compensation Is Taxed

    The tax savings of non-qualified deferred compensation plans are not the only tax fact you need to know before signing up for one.
  5. Retirement

    Not All Retirement Accounts Should Be Tax-Deferred

    It may be better to leave your assets exposed to the tax man when you're saving to retire.
  6. Retirement

    Deferred Compensation Plans Vs. 401(k)s

    Discover the major advantages and disadvantages offered by deferred compensation plans for retirement as compared to a 401(k) plan.
  7. Personal Finance

    How To Choose The Right Bond For You

    Bond investing is a stable and low-risk way to diversify a portfolio. However, knowing which types of bonds are right for you is not always easy.
  8. Personal Finance

    Deferred Tax Asset

    A Deferred Tax Asset is an asset on a company’s balance sheet that may be used to reduce taxable income. It is the opposite of a deferred tax liability, which describes something that will increase ...
  9. Personal Finance

    Explaining Taxable Income

    Taxable income is the net of gross income and allowable deductions.
  10. Personal Finance

    All About Income

    Income is the money you or a business earns by providing goods or services, or through investments.
Trading Center