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Top 10 Tax Minimization Strategies For 2021

What Are The Best Tax Minimization Strategies?

Here we present the 10 best Tax Minimization Strategies, which will help you in deducting your taxes and achieving financial tranquility.

It is a presumed fact that individuals with high net-worth are likely to pay the most money in taxes, which will soon change. Although, just because you pay the most, your saving tends to be the most when you apply smart taxation strategies to minimize your losses.

If you are an individual with a high net-worth of over $10 million, it’s best to read this blog to make tax minimizing strategies.

10 Tax Minimization Strategies To Keep in Mind 

1) Invest in Municipal Bonds

Investing in municipal bonds is one of the best tax minimization strategies. Along with the growth of municipal bonds being lower than value over a period of time, interest from these bonds is tax-free. Assume you make 3.5% from a municipal bond and 6% from a value-based mutual fund.

These are not as far as they seem after taxes and value down the line. Suppose in a year, municipal bonds work as a stable source to your profile and ought to be a part of any worthy asset issuance.

In case you are thinking of pursuing a worthwhile investment with bonds anyway, then it is better to invest in municipal bonds. This indeed makes a difference in tax saving.

2) Contribute to 529 Plans

If you are with kids, you can contribute to their 529 plans. These plans mature tax-free and can be spent on education. The newly revised tax law expanded this to include K-12 education at religious and private schools as well and not just college.

Contributing to 529 plans can play a worthy role in tax minimization strategy. You can do the same for your grandkids and kids.

But make sure of the deduction, as they may be non-deductible on your federal income tax, but they are in most states.

3) Purchase Solar Panels (Solar Investment Tax Credit)

US Government extends 26% solar investment tax credits until 2022. Previously the expiration date was 2021.

If you are open to solar panels, they come with some terrific benefits to take a massive portion out of your tax bill in a single year.

If you have multiple properties, panels might make even more sense. And if you have an office, the expense of cutting on electricity counts too. This will not only save on taxes but even tends to save a lot on other bills as well. These energy-efficient methods enable tax savings.

4) Contribute the most to your 401k

If you are over 50, you are eligible to contribute up to $18,500 per person, per year, as well as a $6,000 annual catchup. All of this comes under tax deduction, minimizing your taxable income. In case your net-worth is high, then minimizing your taxable income can be beneficial for your profile.

5) A Flexible Real Estate Strategy

The newly revised tax law states the reduction on the maximum mortgage value for which you can decrease your payments up to $750,000 plus the interest in other properties is no longer diminishable at all.

Now on, the days are past us when we use to have huge tax write-offs. From a taxation point of view, you ought to consider being a little flexible with your real-estate planning to focus on revenue and expenses rather than minimizing taxes.

6) Convert 401k to a Roth

Roth comes with contribution limits, and individuals with high net-worth are mainly excluded from utilizing them. But as Roth investments mature tax-free, the essence of getting your money into them driving the motivating factor for other ways to do it. Converting your authentic IRA and 401k into a Roth may come as the best option.

Start as early as possible for the rollout as the year of the rollover; you will pay your taxes on the same amount your convert into your Roth.

So, as soon as you convert your funds in, you will get more year to mature taxes for free. Get highly creative with the timing for the conversion so that you can optimize tax-free growth.

This is one of the best tax minimizing strategy if done along with the purchase of solar panel, can grant you with a hefty solar tax credit that can use in the one-time bill from the conversion.

7) Contribute to Health Savings Accounts

You can put a small amount of your profit and income into your health savings account every year. This amount is not that huge, but in the end, the same amount adds up to the more sizable number. The perks of a health savings account are that it gets mature tax-free and can be utilized for medical expenses. This amount not only helps in tax saving but also used in the time of emergency.

8) Start a Donor Advised Fund

You can set up a fund that grows free of taxes and contribute your own profit and income to it. After some time, you can give this money to a non-profit organization of your preference. The pros of DAF you get to claim the tax deduction the day itself you contribute to it and not the day you give your fund to charity. If you are a senior citizen, you can also pair it up with RMDs (Required Minimum Distributions).
Remember, the tax minimizing strategies can get tricky, best to consult with a financial advisor.

9) Increase Your Giving

The newly revised tax law raised the conventional deduction to $24,000 for couples. Being an individual with a high net-worth, you ought to have no hassle surpassing the same plus; you can claim the tax deductions up to 60% on donations of your gross income to non-profit organizations. By opting to provide to cause, you will cut the number of your funds the government utilizes for causes that concern them. This will help tax planning for high-income individuals and tax minimization.

10) Donate Worthy Items

You can contribute more than just money in the form of donations. Land, property, stocks, antiques, valuable dresses, cars, airline miles, and other notable items can be given to various non-profits as a charity.

You can donate stuff that can be of excellent market value to the organizations that can re-sell and use the fund for betterment.

The best part of the donation is you do not even touch your accounts and still benefit from taxation. So getting hold of things for a donation that you eventually would not sell anyway is like getting a tax-free deduction. This is an excellent tax minimization strategy.

Tax minimization is an integral part of cutting costs and achieving financial tranquility. To an individual with high net-worth, you can not just simply aim for high performance.

In fact, you are required to take strategized steps that can support you in achieving your financial goals. These tax minimization strategies will maximize your tax savings and grow your business financially.

If you’re looking for solid ways to minimize your taxes, discover our quality taxation services or dial our toll-free number +1-802-778-9005

By : January 18, 2021
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