Get The Prosecutor On Your Side
About Me
Get The Prosecutor On Your Side



Get The Prosecutor On Your Side

Five Tax Mistakes Investors Should Avoid Making

Douglas Thompson

If you make a significant amount of money through investments every year, it's going to affect your tax liabilities. Investors need to avoid tax mistakes to minimize their tax liability and make the most of their investment profits.

The following are five tax mistakes that you should avoid making as an investor:

Overlooking opportunities for harvesting losses to minimize tax liabilities

One of the most important ways to lower tax liabilities is reporting losses. Investors need to evaluate any positions that have led to unrealized losses and see if it might be possible to sell these positions to strategically take advantage of the losses. 

Losses can offset capital gains that an investor has. If a position that has led to significant losses is unlikely to turn around, selling and harvesting these losses might be the best option. 

Failing to occasionally reconsider the beneficiaries on your investment accounts

Over time, the beneficiaries you want to specify on your investment accounts may change. Reviewing beneficiaries occasionally will ensure that your investments fit in with your plans for your estate.

Investment account beneficiaries could potentially override estate planning through trusts and wills in certain situations. It's therefore important to evaluate them periodically and make changes as necessary. 

Not taking advantage of charitable donation write-offs

Charitable donations can significantly reduce your taxable income while also allowing you to contribute to a cause you deem important. 

Remember that donations to charitable organizations used as tax write-offs don't necessarily have to be cash donations. It's also possible to donate property that can be written off of your overall income as a cash value to minimize tax liability. 

Forgetting to take minimum distributions out of retirement accounts

Once you reach that age of 70 and a half, you will be required by the IRS to take minimum distributions from your retirement accounts.

The IRS requires these distributions because you will be required to pay taxes on them. The amounts of these required distributions are determined by a number of factors including the balance in the retirement account in question. 

Overlooking the 401(k) plan contribution matching of your employer

It can be easy for those who are really into investing to overlook the most common investment opportunities. Those who are employed by a company that does 401(k) contribution matching should definitely take advantage.

Contribution matching into a 401(k) account is like free money for employees. It's important to realize that taxes don't have to be paid on the money in a 401(k) account- whether it is contributed by the employee or the employer- until the money is taken out during retirement. 

Contact a local tax advisory office for more information and assistance.