{"id":10168,"date":"2019-03-27T14:40:53","date_gmt":"2019-03-27T21:40:53","guid":{"rendered":"http:\/\/canary.kcprod.info/blog\/?p=10168"},"modified":"2022-01-11T17:12:23","modified_gmt":"2022-01-12T01:12:23","slug":"tax-time-guide-what-you-need-to-know-about-next-years-taxes-right-now","status":"publish","type":"post","link":"https:\/\/canary.kcprod.info/blog\/tax-time-guide-what-you-need-to-know-about-next-years-taxes-right-now\/","title":{"rendered":"Tax Time Guide: What You Need To Know About Next Year\u2019s Taxes Right Now"},"content":{"rendered":"\n

Most of us only think about taxes once a year: when April starts to loom. But it\u2019s good to get started early. With a little forethought, you could save significant money (and hassle \/ face palms \/ nagging from your accountant) by the time next year\u2019s taxes are due.<\/p>\n\n\n\n

This is especially true if \u2014 lucky you! \u2014 you\u2019ll experience an IPO<\/a> or other windfall this year.<\/p>\n\n\n\n

Here are three smart ways to prepare for next year\u2019s taxes today.<\/p>\n\n\n\n

Strategize For an IPO or Other Windfall<\/h2>\n\n\n\n

Is your company about to go public? Pop some champagne, do the requisite amount of gloating, and then plan for a (potentially hefty) tax bill. While you’re at it, check out our Guide to Equity & IPOs<\/a>.<\/p>\n\n\n\n

While we strongly recommend hiring a qualified accountant<\/a> to guide you, here are a few tips to get you on the right path.<\/p>\n\n\n\n

Pay quarterly estimated taxes:<\/strong> If you anticipate owing more than $1,000 on your federal taxes in 2019, you\u2019ll need to pay estimated taxes<\/a> each quarter. Since the exact amount is difficult to predict, the \u201csafe harbor rule\u201d states you\u2019ll be okay if you pay 100%\u2013110% of the previous year\u2019s tax liability (depending on your income). When it comes to state taxes, rules vary. In California, for example, the safe harbor rule doesn\u2019t apply to people earning over $1 million.<\/p>\n\n\n\n

Shoot for long-term capital gains<\/a>: <\/strong>Whereas short-term capital gains are taxed at the same rate as your regular income (up to 37%), long-term capital gains are taxed at 0%, 15%, or 20%. You\u2019ll likely want to qualify for the latter, which means you\u2019ll need to hold your investments for 365 days after purchasing them.<\/p>\n\n\n\n

In the case of IPOs and stock options<\/a>, it gets more complicated. With Incentive Stock Options (ISOs), for example, you must wait at least one year and one day after exercising an option to sell it \u2014 and at least two years from the day you were granted the option \u2014 to have your profits taxed at the long-term capital gains rate.<\/p>\n\n\n\n

Create a donor advised fund<\/a> (DAF): <\/strong>Do you know you want to donate some of your money, but you\u2019re not sure who to give it to yet? Open a DAF. You can deduct your contribution this year, then spread out your giving over time.<\/p>\n\n\n\n

Invest in an \u201copportunity zone<\/a>\u201d: <\/strong>Consider rolling your gains into a fund that invests in real estate opportunity zones around the country. (Think: Reno, Riverside, The Bronx.) Not only will you delay your tax bill and diversify your portfolio \u2014 but if you hold the investment for 10 years, you won\u2019t pay taxes on the appreciation.<\/p>\n\n\n\n

Consider a Roth IRA Conversion<\/h2>\n\n\n\n

Tax rates are pretty low right now. So if you anticipate you\u2019ll be in a higher bracket after retirement, you might want to convert your traditional IRA to a Roth IRA<\/a>. <\/p>\n\n\n\n

While you\u2019ll pay taxes on the amount converted, you won\u2019t pay on your withdrawals in retirement.<\/p>\n\n\n\n

You choose how much of your IRA you want to convert, therefore avoiding an amount that will put you into a higher tax bracket. Since this is an irreversible decision, however, you should talk to a tax professional before pulling the trigger.<\/p>\n\n\n\n

Alternatively, if your income is too high to contribute to a Roth IRA, you can look into \u201cbackdoor Roth conversions.\u201d<\/p>\n\n\n\n

Max Out Your Retirement Contributions<\/h2>\n\n\n\n

Dreaming of a retirement filled with endless golf games and long walks on the beach? Then you need to start saving now.<\/p>\n\n\n\n

In 2019, taxpayers under 50 can contribute up to $6,000 to an IRA and $19,000 to a 401(k) in a single year. For an IRA, that averages out to $115.38 per week or $16.43 per day. That doesn\u2019t sound too overwhelming, does it?<\/p>\n\n\n\n

When you have an IRA with Wealthfront<\/a>, we make it easy to max out your contributions with the tap of a button. But even if you house your IRA elsewhere, set up automatic contributions that bring you to the maximum \u2014 you\u2019ll be glad you did.<\/p>\n\n\n\n

This is the last article in our Tax Time Guide series. If you missed the first two, it\u2019s time to catch up! <\/em>Learn about the basics<\/em><\/a> or the <\/em>5 things you must do before filing your taxes this year<\/em><\/a>.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Most of us only think about taxes once a year: when April starts to loom. But it\u2019s good to get started early. With a little planning, you could save significant money by the time next year\u2019s taxes are due. <\/p>\n","protected":false},"author":136,"featured_media":9739,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[1278,1705],"tags":[1697,1294],"coauthors":[82,1117],"class_list":["post-10168","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-planning","category-taxes","tag-financial-planning","tag-taxes"],"acf":[],"yoast_head":"\nWhat You Need To Know About Next Year\u2019s Taxes Right Now<\/title>\n<meta name=\"description\" content=\"Most of us only think about taxes once a year: when April starts to loom. But it\u2019s good to get started early. 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