News & Articles
It Is Time To Dot Your I’s and Cross Your T’s
June 01, 2006
by R. Patricia Grenier, CFP®, CSA
There are only a few weeks left before we bid farewell to 2006!!
Before that happens let us make sure we do not pay more than our fair share of taxes.
- There is still time to make those charitable donations. If you are short of cash, put that donation on a credit card.
- Have you maximized your contributions to your company sponsored retirement account and/or an IRA if eligible?? If you are 50 years or older, have you taken advantage of the catch-up provision? Remember every dollar of your contribution reduces your taxable income.
- Do you have gains in your investments that you should realize while we still have the maximum 15% long term capital gains rate? Better yet, do you have losses you can use to offset those gains? This is one time where losses (if you have them) can be put to good use.
Selling at a gain might make sense today. You will pay taxes on a favorable capital gain rate, (at most 15%), and establish a new higher cost basis. Talk on the street is that the favorable capital gains rate may be repealed when the new congress convenes.
- If you sell an investment for a gain or a loss, make sure you wait at least 31 days before you buy it back (that is if you feel it is worth owning). Otherwise the "Wash Sale Rule" will apply and it will negate the benefits of your sale.
- Before you invest in a mutual fund, make sure you review the dates they will pay capital gains. By purchasing after that date, you will avoid paying taxes on "phantom income".
- Flexible Spending Accounts need to be emptied before December 31st. If you have contributed to this account and you haven't used all of the money by the end of the year, you are not allowed to carry it forward. The exception to this deadline would apply only if your employer has amended the plan to move the date to March 31st. Check with your human resources department to ask for a list of eligible expenses.
- Defer income and accelerate deductions. This tried and true year-end strategy never gets old. If you can postpone income for 2007 it may make sense. If you itemize deductions you might consider to pay state and local taxes and medical expenses in 2006 rather than 2007, to the extent possible.
Remember most people fail, not because they plan to fail but because they failed to plan.
Pat Grenier is a General Partner with BRP/Grenier Financial Services in Springfield, MA. Securities offered through Cadaret, Grant and Co., Inc., Member FINRA/SIPC. BRP/Grenier and Cadaret, Grant and Co., Inc. are separate entities.
Pat can be contacted by phone at (413) 736-6712, or email her at pat@brpgrenier.com
Plant your first seed today.
Call 413-736-6712 for an appointment.
You will be our guest for the first consultation.
This article appears in the December 2006 issue of Western Mass Business Woman.