Welcome back to the final article in our 3 part series on how you can save big money on this year’s taxes. Just a little time and effort focused on strategically reducing your tax burden 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.
Today, we’ll look at what to do once you have your tax projections from your financial manager.
Use your tax projections to determine whether you are in a higher tax bracket now than you will be in the future.
If the data puts you in in a higher tax bracket this year then in future years, it is wise to delay those payments when your tax rate will be lower. In some cases, it may still be worthwhile to push your taxes off, even if your tax bracket will be higher in future years, so you have use of the funds that would otherwise be sitting in the hands of the government.
Question: Can you earn more with your 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.
This can be accomplished by enrolling clients or selling products now, while giving your customers until next year to pay for them. Alternately, you could ask vendors if you can pre-pay for 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 will be delivered next year.
Managing when you receive income and pay expenses can save 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. We can refer you to the professionals we trust.