One of the funny things about being a tax professional is the sheer number of questions I get that are really not focused on taxes. In fact, I’d say up to half of the inquiries I get are really focused on financial advice.
I can’t tell you the number of times I have prepared taxes for a new client and had the misfortune to tell them they owe more than they were expecting. Had we had the same conversation 3 months earlier, we could have done something planning wise but with the year closed there are limitations.
But here’s the thing: like it or not, the markets – capital, stock, real estate – are struggling with inflation and continued interest rate hikes, and I get loads of questions about “what should I do?”
That requires a very complicated answer, prefaced by more than a few questions.
After all, if you don’t have a destination in mind, then any direction you go is going to be fine. In my experience, many investors aren’t truly clear on what they “should” be doing with liquidity and thus, their strategies often suffer.
Think about these…
- What are your actual goals for investment? Are you mitigating taxes? Retirement planning? Simply saving money as a store of wealth? Conversely, does your business need capital investment?
- Do you need to be able to liquify an asset quickly? How much “cash” do you really need on hand? “Who” owns that cash – you? Your family? Your business? A trust? Can you weather this downturn in the markets by keeping an asset or will you need to liquify it? What is the projected worth of that asset after the economy gets back on track?
- Here’s a lot harder one, but a GREAT one to ask if you’ve got income-producing assets such as a rental property… Can this asset be placed into a retirement account? Seriously! Now, this is high-level stuff, so don’t think your average financial advisor can whistle this up, but yes, it is possible (and legal) to place ownership of a physical asset into a Roth IRA or similar financial structure. Even better? The income this is creating monthly does not impact your contribution levels. You’d still deposit your $6,000 annually, but ALL that rent? You guessed it – it goes in there, too.
The point in all this is simple: Until you begin to ask really in-depth questions about what you want and expect from any asset, you can’t really divine the “right” strategy for you and your investments. As I said, many of these SHOULD be asked and answered by a true financial advisor, but in my experience, the good ones are really hard to find.
On the other hand, as we near the end of the year, a lot of savvy business owners are looking for an edge on their taxes, and the right tactic in terms of investment can offer some deferment and mitigation advantages.
Before we all take off for the holidays, let’s schedule a time to chat about where you’re at, and see if there’s a tactic you can deploy before the end of the year to save some more money.