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
RetirementThese tax-advantaged retirement savings plans have their pros and cons, and employers and employees must follow strict guidelines.
TaxesDeferred 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 ...
TaxesThe tax savings of non-qualified deferred compensation plans are not the only tax fact you need to know before signing up for one.
InvestingSeveral factors affect the taxable interest that must be reported. Learn more here.
RetirementIt may be better to leave your assets exposed to the tax man when you're saving to retire.
Managing WealthUnderstand the difference between a qualifying or nonqualifying deferred compensation plan. Learn about the benefits of a deferred compensation plan.
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.
RetirementIf you aren't participating in your employer-sponsored retirement plan, you're missing out! Learn the benefits.
TaxesTaxable income is the net of gross income and allowable deductions.
RetirementStrategies to help manage taxable deferred annuity distribution in retirement.