Year End Tax Savings Opportunities for Dentists and Small Business Owners, with Dr Mark Costes, Part 1, #71
Every year we have an opportunity to evaluate our current financial status and make changes that can benefit us when tax time rolls around. It’s that time of year again, so I thought I’d bring you some resources to help you make the needed changes that will benefit you.
The format in which I’m doing that is through a recent opportunity I had to be interviewed, on the “Dentalpreneur Podcast” with Dr. Mark Costes. He was asking me about the topic so I provided 7 year end tax strategies for dentists… but the principles apply on a personal or small business level as well. Let’s dive in!
You will want to hear this episode if you are interested in...
Potential new taxes due to Capital Gains increases [2:06]
Cryptocurrencies: Will they be taxed or regulated any time soon? [4:25]
Ways to reduce your income because of rising tax rates [5:22]
How Health Savings Accounts (HSAs) can help you pay less tax [6:45]
What happens to a HSA if you were to die? [10:56]
Understanding the term “deductible” when it comes to a HSA [12:12]
What is a 529 plan and how can it be used? [13:53]
Are long-term capital gains going up?
There has been some talk of Congress raising long-term capital gains rates — to equal the highest Federal tax bracket of 35%. The good news at this date is that it doesn’t look like that’s going to happen. The maximum capital gains rate is probably going to land around 25%, and that will only be for those already in the highest Federal tax bracket. For those below that highest rate they will experience a 15% capital gains rate. Those in the bottom two tax brackets will experience 0% capital gains tax.
Should the rates go up — and we’re waiting to see if the current legislation goes into effect — it’s already too late to sell gaining stocks to avoid the higher rate. The law would be retroactive, going into effect as of September 13th, 2021.
If tax brackets change, how can you mitigate your tax liability?
It’s likely that the existing U.S. tax brackets are changing. In summary, the tax rates will be going up and the income levels that fall into each bracket are going down. That means you may be paying a higher tax rate come next year. What can you do to decrease your income legally?
Health savings accounts are a great idea because the money you contribute to them can be deducted. You can contribute as much as $9200 for a married couple over 55, for example. The effect of that is a significant income reduction. And many people don’t realize HSAs are what is considered a “triple tax free” account. What does that mean?
You receive a tax deduction when you contribute to an HSA
The money you contribute grows tax-deferred
It is tax-free when you use it for health-related costs
To take full advantage of this account, you should invest those funds while they are in the account. Listen to find out how you can use these accounts to their maximum potential.
Resources Mentioned
How to make the most out of your health savings account (episode)
The Top Providers For HSA Accounts (episode)