Alan Clopine

Alan Clopine is the Executive Chairman of Pure Financial Advisors, LLC (Pure). He has been an executive leader of the Company for over a decade, including CFO, CEO, and Chairman. Alan joined the firm in 2008, about one year after it was established. In his tenure at Pure, the firm has grown from approximately $50 [...]

We have a brand-new Federal income tax law which commenced on January 1, 2018, called the “Tax Cuts and Jobs Act of 2017”. If you’re trying to figure out how to minimize your tax liability given this new tax law, you’re not alone. To give you a head start, here are 10 tax efficiency strategies to pay less in taxes; fully updated for the new tax law.

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401(k)/403(b): $18,500 maximum contribution for 2018, or $24,500 if you’re 50 and older.

Roth contributions: not to be missed if you qualify. Contribute $5,500 in per year or $6,500 if you’re 50 and older. There are income limitations.

Back Door Roth: put money into an IRA then convert to a Roth. When you put the money into an IRA, you probably did not get a tax deduction. When you convert those same dollars, then there’s no tax to pay because you never got a tax deduction in the first place. There are a few caveats to be aware of.

Roth conversions: convert money out of your IRA into a Roth IRA so that all future growth, income, and principal are 100% tax-free.

Tax loss harvesting: if you’ve got assets outside of retirement, they will tend to go up in value. Sometimes they go down in value. What we want you to do is sell when they’re down – not because we enjoy losing money, but because you create a tax loss on your tax return. Most importantly, you buy something very similar. You can’t buy the same thing. You let the market go back up. So you’re still in the market, you’ll still receive the market-like returns over the long term. In the meantime, you’ve created a tax loss that will be utilized against any other capital gains.

Bunching charitable donations. More important in 2018 than ever because we have higher standard deductions. You can take the higher of a standard deduction or itemized deductions on your return. Now the standard deduction is $12,000 for a single person or $24,000 per married couple. And there are huge limitations on how much you can deduct in state and local income taxes. So many of you will no longer be itemizing your deductions, which means, if you have a charitable donation, you won’t get any benefit for that. So what you might want to do is make a whole bunch of charitable donations in one year. Right? So you get over that limit, and then the following year you’re not making any, or very few. You’re basically bunching those deductions together to get over that standard deduction.

Donor-advised funds are actually a good way to do that: put money into a special account, you can get a tax deduction upfront, then you can utilize that account to give to charities over time.

Donating appreciated stock: this gets missed a lot. Your church, your charity, will probably take your stock account, Your stock securities. You don’t have to sell the stock and then give them the cash. Just give them the stock, and then what the stock was valued at will be your tax deduction, and you don’t have to pay taxes on that gain.

Consider changing to an independent contractor – new for 2018, because of this new section 199A rule of a 20% deduction for certain independent contractor income.

And finally, solar power: there’s still a 30% tax credit. In other words, you spent $30,000 on your solar power. 30% of that’s $9,000, you get a tax credit for that – s $9,000 credit. That will be through 2019. Starting in 2020, those amounts will be lower


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