Welcome back to our third and final article in our series on how you can save big money on your taxes this year. Just a little time and effort focused on strategically reducing your taxes can pay big dividends.
In part 1,we discussed the first step in saving big on taxes: strategize with your tax advisor at key points during the year.
In part 2,we gave you specific action steps to take right now. Today, we’ll look at what to do once you’ve got your tax projections from your financial manager.
Once you have your tax projections, you want to look at whether you are likely to be in a higher tax bracket this year or next year, this year or in future years.
If you are likely to be in a higher tax bracket this year then in future years, it makes sense to push taxes off into the future, when your tax rate will be lower. Even if your tax bracket will be higher in future years, it may still be worthwhile to push your taxes off so you have the use of funds that would otherwise be sitting in the hands of the government. Question: can you make more with the money now than you’d pay in higher taxes by pushing them off until later?
If so, you can decrease this year’s taxes by pushing income into the future and accelerating expenses that you would otherwise pay next year, into this year.
You could do that by enrolling clients or selling products, but giving your customers until next year to pay for them. Or you could ask vendors if you can prepay next year’s services this year.
If you would prefer to pay taxes this year because you will be in a significantly lower tax bracket this year or have losses that will be expiring to offset your income, you can increase this year’s income by offering year end discounts on products and services that may not need to be delivered until next year.
Managing when you receive your income and pay your expenses can save you big money on your taxes this year. If you have not yet run your projections because you do not have a financial manager or a tax advisor, contact us as well and we can refer you to the people we trust.