Tax Planning
Effective Tax Management is key to maintaining and building wealth. Taking advantage of the allowances in the tax code to reduce your taxes will help you pay no more than your fair share of taxes. We partner with you and your Certified Public Accountant (CPA) to come up with an effective tax management plan that will insure just that. Apex Wealth Management,LLC is not a tax professional and does not offer specific tax advice. We will, however, advise our clients on how their investments will impact their taxes. Before implementing any of the strategies on the site, please consult with your tax professional.
The first step in managing your taxes correctly is understanding how our tax system works! Under our progressive tax system, income is divided into brackets, each with a different tax rate. Your marginal tax rate is the rate at which your last dollar of income earned is taxed. Your effective tax rate is the rate of taxes that you actually paid and is typically different than your marginal tax rate because of deductions and allowances.
Qualified retirement plans such as 401(k)s, 403(b)s, SEPs, and SIMPLE IRAs all enjoy a tax-deferred status, meaning that you don't owe taxes on the earnings now, typically because you don't have the use of the money until the proper retirement age of 59 1/2 is reached. The accounts are funded using pre-tax dollars, meaning that taxes have never been paid on the funds put into the account or that a tax deduction was taken when the account was funded. When the owner reaches retirement age and begins to withdraw funds from the account, taxes are paid on the amount withdrawn. Early withdrawal of the funds will create an immediate tax penalty on the funds withdrawn.
Participating in your qualified (tax-deferred) investment plans are a great way to accumulate assets and to help fund a proper retirement.
There are different types of investments that have a tax exempt status. These investment vehicles must meet certain rules under the IRS code. These vehicles are usually funded with after-tax dollars. Accounts such as Roth IRAs, College 529 Plans, Education IRAs and also some Municipal Bonds will fall into this category, if certain conditions are met. Consult your advisor for more details.
Of course, not all investments can have enjoy a tax advantaged status, that's when proper management of your investments come into play. Choosing investment vehicles that will not create large tax bills, reducing short-term capital gains, and properly positioning your investments can help to limit your tax liability at the end of the year. Working closely with your advisor and accountant can help keep you safe from surpises when April 15th comes and the tax bill is due.
This is just a brief overview of some of the options available to you as an investor, no specific recommendations are implied here and not all investments are suitable for each investor. Be sure to consult your tax professional before implementing any new investment strategies and make sure you understand the impact that your investments will have on your taxes.
