Posts Taged tax-strategy

Expecting a Tax Return? Consider These 4 Ways to Use It

Depending on your withholdings, you might be in for a solid tax return from the 2019 tax season. Last year, the IRS returned $324 billion to taxpayers with the average tax return at about $2,900. Before those funds arrive in your account, consider these options to help your tax return work for you.

First: Revisit Your Financial Plan

If you haven’t already, consider checking in with your financial advisor before you make any plans for your returned funds. Your check in should be a good reminder of your established financial goals and should also help you to ascertain that your existing plans are on track to meet those goals.

Once you know where you stand with your financial planning, you can set your mind to other financial goals or even to a fun expenditure or two.

Option 1: Add to existing savings accounts 

Tax-smart investment accounts can include IRAs, HSAs, and 529 plans. You may find that the extra thousand or more that comes in the form of a tax return can provide a nice boost to one of your savings plans.

Or maybe this you’re ready to open a new savings account. Favorable annual percentage rates (APY) could be an opportunity to open a new account with your tax return.

Your financial advisor can help you to understand rates and provide guidance on choosing an account that might work for your savings goals. Depending on the minimum balance requirements and accessibility and your own desires and needs, you might find that a new savings account with a high APY is a smart way to use that extra cash. 

Option 2: Invest

If you’re looking to make money with your money, investing your tax return may be an option to consider. Stocks, savings bonds, and interest bearing accounts are some ideas for investing your tax return, each with different benefits that will change depending on your specific financial situation.

Whether you have a robust investment portfolio or are interested in diversifying your investments, you may find that investing your tax return is a viable idea for your financial planning. Your financial advisor can provide more information about investment options and whether or not they’re a good fit for your tax return spending.

Option 3: Give

The season of giving may be over, but giving to charity and family is always an option for those looking to be tax-smart and feel good about how they spend their money. This can potentially serve as an addition to the charitable donation deductions you claim on the next year’s taxes, but it also gives that warm, fuzzy feeling that comes with helping a cause you care about. 

Option 4: Invest in Personal Development

Attending a class, whether for recreation or to become more qualified in your field, or starting a side business, could be a unique way to invest in your future. Though you’d be spending your tax return rather than saving it, personal development usually isn’t considered frivolous spending. If you’ve been waiting for a time to invest some cash in a personal project, this tax return season may be the time to do so.

Choosing an Option

Regardless of the amount of money you received in your tax return and your financial status, consider having a conversation with your advisor about your financial plan and how your tax return may or may not play into it. If you want to learn more about investing, our CFP® professionals at Puckett & Sturgill Financial Group would love to have a look at your unique situation and discuss the possible options for using your tax return this year.

    Stock investing involves risk including loss of principal. 

    Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax. 

    Prior to investing in a 529 Plan investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such states’s qualified tuition program.  Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing. 

    There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio.  Diversification does not protect against market risk.

    ‘Tis the Season of Giving! Consider These 3 Ways that Giving Makes a Difference for Your Finances

    As the holidays approach, you may find yourself feeling generous. And if you haven’t quite caught the spirit of giving, some reasons to consider financial gifing this season include:

    • It might help you to organize your finances
    • It’s a way to teach your children and others around you to live generously
    • It can make you feel good and increase your happiness
    • You can make a tangible difference in the life of your family member or friend who receives your gift — or those helped by a charity you support. 

    If these reasons aren’t enough to spark your desire to give this season, you may be interested to know that that financial gifting is a possible way to reduce your taxable income and thereby pay less in taxes next year. 

    When you’re considering financial gifting, it’s important to note some potential implications about the different kinds of gifts you give this holiday season. Read on to learn about a few ways you might decide to give:

    1. Giving Financially to Individual Family Members 

    Giving to family members is a great way to be generous this holiday season, especially as your children start families of their own, or your grandchildren head to college and start new jobs. According to the IRS, a gift is considered “any transfer to an individual, either directly or indirectly, where full consideration is not received in return.”

    For gift giving to family members or to any other individual, gifts that do not exceed $15,000 per person, per year are not taxable as they do not exceed the annual exclusion for the calendar year. If your gift to a family member is going to exceed the annual exclusion, you will need to fill out some forms and have handy the documents that will help you complete it, like copies of appraisals or documents regarding the transfer.

    Of course, these are just some of the tax implications for giving to family members or other individuals to be aware of, but there are other considerations like your own needs and desires for your ideal financial future. Perhaps for your particular financial situation, individual gift giving makes less sense than investments for grandchildren or even gifts to charitable organizations.

    To keep track of large financial gifts or how money gifted today impacts tomorrow’s retirement goals, you may want to enlist the help of a professional. Your financial advisor can help you break down your financial goals, navigate any necessary paperwork, and help you to prioritize spending in the short- and long-term.

    2. Investing in Your Family’s Future

    When it comes to individual financial gifts, you might also consider long-term savings for children and grandchildren. Some options include:

    • Establishing a trust
    • A 529 educational account
    • Gifting IRA earnings or savings bonds. 

    Establishing a Trust

    Trusts can be an ideal option for individuals who have a considerable amount of money to give or invest and want to generally maintain how the money is managed even posthumously. Establishing and putting money into a trust is relatively easy, but you have to make many decisions regarding trust management. These include:

    • Whether you will set up a single trust for multiple grandchildren or family members or separate trusts for individual beneficiaries
    • What type of trust to set up
    • When the funds will be released
    • How funds may be spent
    • Whether funds will be prevented from being released under certain circumstances
    • A trustee who will manage the assets and approve the release of funds

    Taxes on trusts are another important consideration, given that things can get a little complicated when there are multiple parties involved. Your financial advisor is an ideal partner in sorting out these details and making an educated decision about gifting a trust.

    Educational Savings (529 Accounts)

    If education is important to you and your family and you like the idea of paying minimal taxes on your gift, a 529 account may be an option for financial gifting to a child or grandchild. Putting money aside in a 529 account ensures your beneficiary will use the money for education and allows your money to grow tax-free.

    There are different kinds of plans to take advantage of, and different states mandate differently on these types of accounts, so consult your financial advisor for guidance on what kind of 529 options are ideal for your circumstances. 


    Some people prefer to give the gift of an investment. Savings bonds are a popular vehicle for this type of financial gifting.

    If you decide to purchase a savings bond or give one as a gift, the interest earned on it will be taxable. The listed sole owner of the bond will be responsible for paying the taxes on the interest, so if you gift a bond to a child or grandchild, you can either retain sole ownership, add them as a co-owner, or make them the sole owner.

    There are some options regarding when you pay the taxes on this interest. Your financial advisor can provide you with options, as well as guidance on choosing an ideal payment option.

    The Bottom Line

    These are a couple options and tax implications for long-term savings for grandchildren. Conversations with your financial advisor, CPA, and the parents of your grandchildren are important ones to have. Ideally, you want to do what’s best for your own finances as well as make a positive impact on your family members’ financial futures.

    3. Giving to Charitable Organizations

    Another option for giving over the holiday season is charitable giving. After all, this is an important season for the non-profits and other 501(c)(3) organizations in your life. Why not give them a financial boost to put them ahead in the new year?

    There are a few important details regarding how you write off charitable giving for tax purposes, which your financial advisor or CPA can help you to understand. One important thing to remember is that 2017 tax reform has increased the standard deduction, which has changed the way people are able to deduct from their taxes for their charitable giving.

    You have some options for planning your charitable giving in order to make a difference to the organizations you support and your own tax bottom line. It’s important to discuss this with your financial professionals in order to get the clearest picture of how you can proceed with charitable giving this holiday season and beyond.

    Make the Most of Your Financial Gifts

    If you are looking for ways to give a little and improve your personal tax strategy at the same time, you have quite a few options. The choices listed here are certainly not exhaustive! 

    If you desire to pursue financial gifting this holiday season and aren’t quite sure where to start, our team of CFP® professionals at Puckett & Sturgill Financial Group are ready to help you find the smartest way to give. Contact us for a consultation or assessment today! 

      Prior to investing in a 529 Plan investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program.  Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.

      Tax Saving Tips for Self-Employed Retirement Planning

      As a business owner or freelancer, you already know that it’s important to be proactive about tracking your income and keeping detailed financial records. And when it comes to planning for your future plans, including retirement, you want to make the most of each dollar you earn today.

      When you’re self-employed, it’s important to consider how year-to-year expenses, including your taxes, can impact your future financial planning activities. If you’re evaluating your mid-year finances and looking for ways to make the most of your retirement strategy, consider some of the following tax saving tips have the potential to impact your retirement plans.

      Look into Potential Deductions

      As a self-employed taxpayer, you may qualify for certain deductions that allow you to set funds aside for retirement planning tax-free. The 199A tax deduction is one example, which allows you to deduct up to 20-percent of Qualified Business Income (QBI) from a business operated as a sole proprietorship, partnership, S-Corp, or LLC.

      Your financial professional is the best person to consult when considering which deductions are right for your situation, based on your business structure, income, and other investments. However, as a business owner, you may qualify for certain deductions that’ll positively impact your bottom line and provide a way to add a little extra to your retirement investments.

      Evaluate Your Investments

      Speaking of investments, there’s never a bad time to look over your portfolio and review how your nest egg is working for you. Depending on your specific investment mix and your earnings, you’ll have certain tax obligations to report, but you may also get certain benefits due to your self-employed status.

      Real estate investments, in particular, can offer some tax savings if you are the manager of your own properties. If you are invested in real estate, your tax professional can provide direction in understanding how to claim these properties and take advantage of business expenses related to their upkeep and management.

      More traditional investments, like your stock portfolio, require periodic check ups, too. Remember, the money you earn from these investments is subject to a tax category of its own and you want to ensure that you’re prepared to shoulder this tax burden when you file. If you anticipate that your capital gains for the calendar year will be quite high, look into ways to reallocate the funds or remove certain investments to better meet your target numbers.

      Solidify (or Review) Your Retirement Plans

      Perhaps you’ve got a retirement plan figured out and you’re humming along with making progress toward your long-term financial goals. Or maybe you haven’t yet started down the path of retirement planning.

      Whichever situation applies to you, it’s important to review your retirement options, since your self-employed status can impact the investment vehicles you have available to you. There are a variety of retirement accounts, including IRAs, available to small business owners and your financial advisor can provide guidance on choosing retirement options that make sense for your future goals, while taking your self-employment into account.

      In fact, your financial advisor is an invaluable partner in working through your self-employment retirement planning process. They can help you narrow your focus and look at investments that work for your current budget as well as your future plans. They can also help you to determine how today’s actions can impact your tax strategy – and connect the dots to see how that could positively or negatively impact your long-term retirement planning.

      To learn more about your self-employed retirement planning options, contact Jacob Sturgill today for an initial consultation!

        This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

        Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.