NOV 16, 2020 Posted in Budget, Accounting

Top Tax Strategies I Tell All My Clients:

1. Max out your HSA.

If you are eligible to set up a Health Savings Account (HSA), you should do so. It’s tax-free money that can be used for most medical expenses, rolled forward year over year. If you don’t use it all this year, you can use it in the future. For many accounts that have over $1,000, the money can be invested in mutual funds, stocks and other investment tools to generate additional funds. This allows your tax free money to generate more dollars to pay for future medical expenses that you will end up needing at some point as you get older. Additionally, unlike other retirement accounts, there are no minimum required distributions at a certain age.

2. Max out your other retirement accounts.

If you have the ability to do this, take advantage of it; no one else is going to save for your old age. The time of most pensions and employer funded retirement is long gone. I advise most young clients (without a 401K) to max out their Roth IRA, because as soon as they reach income of $139K ($206k for married filing joint), the Roth is no longer available. As opposed to a traditional IRA, the Roth is not tax deductible, but the savings grow tax-free as well as the withdrawals. There are different types of retirement accounts available to each client based on his or her situation, and qualified tax advisors like us can help you plan properly.

3. Set up a 529 plan. This is a relatively new addition to the list. 529’s have been around for a while, but until recently the funds were only allowed to be used for college savings. Under the new tax laws, 529 funds can now be used to pay for lower schools as well. For many of our clients, that now includes private schools. While there is no major tax deduction available for contributing to a 529 plan (note: NY has a $10K tax deduction for a married couple filing jointly), all earnings are tax free and can be used for schooling when you choose.