Year-End Tax Saving Strategies to Consider Now

Whether earning regular or investment income, it’s important to factor tax planning into your investment strategy. Proactively preparing for taxes allows you to reduce tax costs and keep more earnings, boosting your overall wealth. Here are a few strategies with a real estate slant that could potentially lower your taxable income. Before engaging in any transaction, consult with your tax, legal and accounting advisors to make sure it fits your current situation and long-term financial goals. -Defer Income to 2024. Delaying the close of a property sale until January 1, versus the day prior, December 31, can result in the taxes owed on the profit to be due in April 2025. This gives you an extra year to plan for ways to cover this tax liability. Overdue rent can also be collected in the new year to delay taxes. -1031 Exchange. Defer capital gains tax on the sale of an investment property provided the proceeds are reinvested into a similar, like-kind property. After the sale date, you have 45 calendar days to identify a potential replacement property. The purchase of the new property needs to be finalized no later than 180 days after the sale of the initial home. -Tax-Loss Harvesting. If you have investment gains, it may make sense to offset the capital gains tax by selling securities that have lost value since you bought them. You can deduct up to $3,000 of net losses a year to offset your total annual income. Losses exceeding the $3,000 threshold can be carried over indefinitely to future tax years until the amount is exhausted. -Self-Directed IRA. This is a type of traditional or Roth IRA that allows you to invest in physical real estate or passive mortgage investments versus stocks and bonds. You can gain the standard tax advantages of regular and Roth IRAs that include deferring or paying no taxes. Year-end tax planning is crucial to help maximize your tax savings, allowing you to keep more income. Contact us for guidance on whether these strategies can help meet your investment and overall financial goals.