Who would ever have foreseen a time when petroleum companies would pay you to take their oil? This phenomena underscores the concept that within every problem there is opportunity. Here are some tax strategies to think about during the coronavirus pandemic.
Look into Roth rollovers
If you have high balances in tax-deferred retirement accounts, consider rolling them into tax-free Roth accounts. Since you have to pay tax on the funds you convert, the lower value of the accounts means less tax is due. Plus if your income is lower, the tax hit will also be lower. The good news here is that growth in these funds when the economy recovers will now be tax-free!
Consider removing a dependent
Stimulus payments help most families with kids, except if they are over age 16. By removing them as a dependent and then filing their own tax return, they may be eligible for a $1,200 stimulus payment from the federal government.
Capture capital losses, then reinvest
Have a stock you like long-term, but it took a hit? Consider selling it, then repurchasing after 30 days. This will avoid the wash sale rules in the tax code. This technique can lower your cost and it can also be used to offset other investments you sell at a gain.
Time to buy or sell?
The value of real property of all kinds will be moving. Some will move up, some down. So now is a time to think about buying or selling. If you currently own property, don’t forget to look into the like-kind exchange rules to help defer any tax bite!
Leverage penalty-free withdrawals
You can now take up to $100,000 out of a retirement account and avoid the 10% early withdrawal penalty. Even better, the income tax on these withdrawals can be paid over three years and you can always repay the money over that same time period. There may be planning opportunities around this added flexibility, but only if you review your options and correctly use the funds.
It is more important than ever to keep up with rule changes and be on the lookout for tax planning opportunities. Call if you wish to discuss your options.
Last updated: 04/27/2020
The Covid-19 Tax Resource Portal (herein after referred to as "Site") is made available as a service to our clients and others for informational purposes only. These materials and information should not be considered as, or a substitute for, accounting, tax or financial advice. While it is hoped the materials provided here are helpful as background material, it is not warranted either expressly or implied as accurate or complete. You should refrain in taking any action based upon the information provided here until you have received proper counsel.
In addition, you understand that any links to any other web site or services does not constitute endorsement of or warranty of any service, product or information provided on their site(s). These links are provided for convenience only.
While our intent is to make transmissions to and from this web site secure, it is understood that no warranty of security can be made and that unforeseen security breaches by "hackers" is a possibility, however slight.
Reproduction of part or all of the contents on this site in any form is prohibited other than for individual use only. All content on this site is copyright protected and/or trademarked as appropriate and may not be copied, duplicated or altered in any way.
In no event shall Mark Borel & Associates Inc, its affiliates or suppliers of any content on this site be liable for any indirect, incidental, special, punitive damages or consequential damages of any kind, or any damages whatsoever arising out of or related to your use of the Site, the content and other information obtained therein.
© 2020 . All Rights Reserved.