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
InvestingMany factors impact the amount of taxable interest bond investors must report.
RetirementThese tax-advantaged retirement savings plans have their pros and cons, and employers and employees must follow strict guidelines.
TaxesHigh income earners can use these tips to make their portfolio more tax-efficient.
InvestingSeveral factors affect the taxable interest that must be reported. Learn more here.
RetirementDiscover the major advantages and disadvantages offered by deferred compensation plans for retirement as compared to a 401(k) plan.
RetirementIt may be better to leave your assets exposed to the tax man when you're saving to retire.
RetirementWhat's are the key differences between these two retirement savings plans?
InvestingBond 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.
TaxesTaxable income is the net of gross income and allowable deductions.
RetirementGovernment benefits can cost you big money! Know the income thresholds before you file.