Investors: Lower Your Taxes – Here’s How


We’re in the back stretch of 2011, which bodes well for folks contemplating some tax related moves. Here are some suggestions you may want to put into your own arsenal. Though basic in nature, I’ve learned most tax preparers definitely aren’t proactive in digging for tax savings beyond the normal deductions. You’ll notice a common denominator here.

It’s not difficult to spread many taxable events over a couple different tax years — while gettin’ all the money in the next six weeks.

Some examples for ya.

1. You’ve decided to take the money from your 401k or IRA in order to invest elsewhere. Instead of doin’ it all this year, do half in 2011 then the other half in January. For many this not only spreads the income over two years, but sometimes it also avoids movin’ up to a higher marginal tax rate. 

2. Would ya like to take a capital gain, but the projected tax hit made ya dizzy? Do the same thing. In fact, you can do better in some instances. Let me ‘splain.

Structure the transaction (with a highly competent tax pro, of course) so it closes this year. If you’re carrying the financing, split the down payment. Let the buyer pay half at closing and the other half in January. You can do much the same, only over several years with the note you carried. If it works for your needs, make the payments interest only. Also include regular principal lump sum payments every December and January. This will spread out the note payout over several years, lessening the tax impact even further.

3. The same goes for the sale of any notes you have. Sell them on terms similar to the ones above. The actual structure is limited only by tax rules and the imagination, experience, and knowledge of you and your professional tax guy/gal.

There are of course, many other applications using this simple principle, but you get the gist. If you’re in a situation you think might be on point, gimme a call and I’ll give you the straight poop. If it seems apropos to execute this strategy, I’ll refer you to a trusted, very experienced CPA for specific guidance.

Though it surely is a simple concept, it’s saved my clients literally millions over the last 30+ years. Consider it just another arrow in your quiver.

Photo: Chris Tolworthy

About Author

Jeff Brown

Licensed since 1969, broker/owner since 1977. Extensively trained and experienced in tax deferred exchanges, and long term retirement planning.

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