Hopefully, many of you had a grand year financially in 2021.  Here are some money-saving tax strategies from Jordan Curnutt, a Certified Financial Planner who works with top producing real estate professionals, that you might consider for 2022.

Tax Planning Action Items to Consider

One of the adages you’ve likely heard from Tim and Julie Harris and their Harris Real Estate Coaching services is to make your business work for you instead of you working for your business.  To make your business work for you, you need to create and develop a business plan.

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The same is true for taxes.  In order to make your taxes work for you, you need to create and develop a plan for your taxes.  Make sure that your tax plan is properly executed by collaborating with your CPA and financial planner in order to optimize your income, build your balanced net worth and mitigate your biggest personal expense, taxes.

Money-Saving Tax Tips from Curnutt

  1. Backdoor Roth IRA strategy: Curnutt considers this strategy to be at the top of any agent’s tax planning list of options to consider.  No if’s, and’s or but’s here…work with a CPA and financial advisor to verify whether or not this strategy is a fit for you and to make sure this complex process is done properly.  If yes, fund a nondeductible IRA and then process a Roth conversion.  Be aware of the two tax deadlines involved:  the contribution deadline for any given year, typically April 15; and two, the conversion deadline which is December 31 of each year.  Your CPA and financial planner will discuss the necessary details with you.
  2. Charitable Giving: Continue reporting your charitable contributions.  A married couple filing jointly can take the standard deduction of $25,100 AND claim an additional $600 deduction for qualified charitable gifts.
  3. Estimated Tax Payments: Make sure your financial planner and CPA have current information about your income level.  According to Curnutt, the primary goal of making estimated tax payments throughout the year is to avoid generating a tax penalty for underpayment.  Curnutt’s two-pronged strategy for avoiding an underpayment penalty is to pay at least 90% of the tax for the current year OR 100% of the tax shown on the return for the prior year, whichever is smaller.  For tax year 2022, estimated payment due dates are April 18, June 15, September 15 and January 27, 2023.
  4. Consider Shifting to an S Corporation in 2022: Make sure to include your financial planner, CPA and attorney when making this shift from an LLC or sole proprietorship to an S Corporation.  There are tradeoffs here such as extra costs (hiring a CPA if you don’t already have one, asking the CPA to help with your payroll and filing a separate tax return for your business).  Potential tax savings (S Corps. act as “pass through” entities and avoid double taxation; S Corps. allow your business to pay out a dividend to you, the owner; by earning less salary in lieu of a dividend instead, FICA (payroll) taxes can be saved.  Begin planning for this now for tax-year 2022.
  5. Establish Solo 401K Now: The solo 401K has advantages for high income top producers because it has higher contribution limits than a “regular” IRA.  Solo 401K contribution limits for tax years are variable.  Tax year 2021 contribution limits were $19,500 – employee contribution, $38,500 – employer contribution, total contribution limit – $58,000.  Filers over 50 years old were entitled an additional contribution of $6,500 on top of the $58,000.

Again, collaborate with your CPA, financial planner and attorney when considering any active tax-planning options.

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