Tax planning is important to reduce how much you pay in taxes as a New York resident. There are legal ways to decrease what you owe the government by the end of the year. Planning in advance and implementing your strategies keep more money in your pocket.
Employ your spouse or children
As long as you think your spouse or children would perform well at a role in your business, then hiring them could help reduce your taxes. Your child could also contribute their earned income to an IRA. This would give them a head start on saving money for retirement.
Tax lot matching
You can choose to report stock sales via the tax lot matching method instead of “first in first out” (FIFO). Tax lot matching might save you money on shares that you sold at a loss or minor gain.
Gift stocks to your child
A uniform transfer gift to minors custodial account is a tax planning strategy to consider if you have substantial gains on a stock. When you transfer the stock to your child and have your child sell it, you could report part of the profits under your child’s income. This money could go toward their education.
Donations
When you donate appreciated securities to qualifying organizations, you could receive a full tax write-off. This method also allows you to give a larger amount to charity because you don’t have to pay taxes on cashing out.
Don’t use illegal methods
You might hear about illegal methods of tax reduction from your peers, but these are actually tax evasion rather than legal tax reduction. Always check the law before implementing a new method to avoid legal problems.
It’s worth looking into tax planning to be more strategic in how you spend your money. By a simple change in strategy when you donate, save money and report investment income, you could decrease your tax bill.