Many people think of estate planning as merely a set of documents that lays out their instructions after they die. However, estate planning also involves strategic preparation during your lifetime. Everyone has different goals with their estate planning including protecting their vulnerable beneficiaries, leaving instructions for end of life care, providing for children and grandchildren, or even maximizing gifts to charities. But there is one goal that everyone can typically agree on: Minimizing taxes. Here are some steps to take before the end of the calendar year to reduce your tax bill. Tax Losses If some of your investments have done really well this year, and you have significant gains, you might want to offset some of those with tax losses. While you might not think of investment losses as a good thing, they could really help reduce your tax bill. In order to “harvest” your losses, you’ll need to
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As we are in the midst of tax time and are navigating the complex world of financial planning, it can be easy to get overwhelmed by the various strategies and terminology used in the industry. Two terms that are often used interchangeably are “estate planning” and “tax planning.” While both strategies are important components of a comprehensive financial plan, they are not the same thing. Estate planning is the process of creating a plan for the distribution of your assets after you pass away. This can include creating a will, establishing trusts, naming beneficiaries for retirement accounts and life insurance policies, and making decisions about end-of-life care. Tax planning, on the other hand, is the process of minimizing your tax liability through strategic financial decisions. This can include taking advantage of tax deductions and credits, contributing to tax-advantaged retirement accounts, and creating trusts or other structures that offer tax benefits.
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As we enter the 2020 tax season, however unwillingly and with gritted teeth, you might be interested to know that Americans did not always pay personal income taxes. The policy of taxing personal income began with the onset of the Civil War, when Congress passed the Revue Act of 1861. This was a new direction for a Federal tax system based mainly on excise taxes and customs duties. However, Congress soon realized there were certain inadequacies with the new income tax policy. No taxes were actually collected until the following year, when a new law was passed on July 1st. This law made important reforms to the 1861 law, many of which we find in various forms today. These include a two-tiered rate structure based on income, a standard deduction ($600), and taxes being “withheld at the source” by employers to ensure timely collection. By now you must be wondering
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