Welcome back to the exchange, everybody.
The deadline to file 2023 tax is just a couple
of days away,
Monday to be precise. But about 1/3 of Americans have
yet to file their returns according to the IRS.
And for those of you in that group,
our next guest has some tips to help maximize your
refund if you're due one.
Joining us now, Bill Harris,
founder and CEO of Evergreen Money and former CEO of
both PayPal and Intuit.
Bill, I think I've used Intuit products to file my
taxes in the past.
Yes, you would have TurboTax.
TurboTax absolutely did.
There's very little that a person can do today to
reduce what they pay for their
2023 returns, right? Very little.
There's one thing you can do,
which is you have not funded your IRA.
You can do so if you do it by April
15th,
but there are income limits on whether that's income deductible
or not,
about
$156,000 depending upon your filing status.
And even if you qualify,
it's only it's only about
6005. So let's turn to the things I can do
right now for
2024 to reduce the tax I owe either during this
year or when I have to settle up with the
IRS next string.
What should I do? Well,
that's exactly the question because what people do is they
panic at the end of the year and they need
to prepare the taxes and then file.
But all of that is backwards looking.
There's nothing you can do.
Right now is the time to think about setting yourself
up for
2024 and make sure that this time next year is
not as painful.
So what do I do?
Well, a couple of things.
Some of the things you can do well,
first of all, if you are a high income taxpayer
in a high tax state,
New Jersey, New Jersey, NJ is a good 1 /
10% at the highest levels.
That's in addition to the federal and the NIT.
Your total tax rate is going to be in excess
of 50%.
First thing you need to do,
get your money out of bank accounts and CDs
and put it into. Put it into.
Well, first of all, on the why out of bank
accounts,
because you're paying more than 50%.
It's about the worst thing you can do from a
tax point of view.
Put it into if it is cash and fixed income,
either treasuries which are state tax,
state tax exempt, Munis which are federal tax exempt and
could be triple tax exempt.
If you buy in New Jersey,
you bet you triple tax free,
no taxes whatsoever. And then for other fixed income,
put it in your tax deferred accounts.
IRA's, Roth's four O1 KS.
Most people do that wrong
because what they're doing is they think that stocks are
my long term investments.
These are my retirement accounts.
I'll put the stocks in the retirement account.
That's wrong because it's the income generating stocks or
assets that have to have the high taxes That's right.
So that you do your fixed income stuff,
you do your trading. If you're trying to rebalance your
portfolio,
you would be well advised to do more of your
trading in your tax sheltered accounts,
wouldn't you? Not really, because you really want to shelter
the income.
On the trading side, what you've got is stocks which
are generating either dividends or capital gains.
You're already ahead because now top tax rate federal is
20%,
not 37%. Then what you can do is when you
trade time those trades,
it's very punishing if you trade
in less than 12 months.
If more than 12 months,
you're into long term capital tax rate gain rates and
you can control when you owe the taxes
by by timely buying and selling.
Timely buying and selling, you can defer,
simply not sell share, wait until
2025 to sell, but realize losses today to offset any
games I have.
Exactly. That's the second part.
You can sell, you can defer,
you can offset, so you can sell if you harvest
your losses.
And then finally, ultimately you're going to have some capital
gain that's unrealized but built up.
And there are ways to get rid of that without
paying taxes as well.
There are charitable strategies, gifting strategies and
other kinds of estate strategies.
So net, net, you can go from paying
50% of your earnings on your investments to tax
to paying 0%.