September 06, 2022
Tax Savings Strategies | Tax Planning 
In this episode of Berry’s Bites, Chris Berry discusses Tax Planning and the 5 Core Tax Savings Strategies.
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Episode Transcript:
Tax planning, because it’s one of the biggest risks and biggest opportunities right now. Couple of reasons one is we have the tax cuts and jobs act that runs from 2018 to 2025 where in 2025 your taxes are going up across the board about three to four percent.
Then we have the Secure act that says your kids are taxed your beneficiaries are taxed potentially more based on inheriting these IRAs and then now we’re we’ve crossed 30 trillion dollars prior to the pandemic we’re 22 trillion dollars in debt and so first one is Roth conversions so this is taking pre-tax money like IRA money moving it to a Roth, which grows tax-free.
This is tax-deferred meaning whenever you pull money out of here you’re gonna have to pay the tax and we know taxes going up in the future Roth money this grows tax-free and pretty straightforward most people are familiar with Roth conversions but a lot of people get hung up on the difference between a conversion versus a contribution. There are no income limits on conversions you can take a hundred thousand dollars inside of your IRA, and move that over to your Roth now you have eighty thousand dollars of Roth money if you wanted to a more advanced strategy.
Is taking your ira money or 401k money pre-tax money paying the tax and now moving it into cash value life insurance typically index universal life there are pros and cons to this the nice thing about this is it protected against downturns on the market this could be more of a legacy play. We’re leaving more to the next generation than say Roth plus also we can build on some long-term care benefits relatively new strategy but this is something that’s available and we’re talking about today about it is what’s called donor advise funds you could use this for like highly appreciated assets if you’re charitably inclined we kind of run into issues because of the standard deduction is so high right now but if you’re itemizing and you’re donating charity what we could do is lump some of those charitable donations together all in one year and then we could itemize to be able to write off donations to charities.
So maybe we put 30 000 into a donor-advised fund every three years or so and then from there you can decide which charities you want this to go to and then that would lower your income tax by 30 000 because of the charitable contributions and then once you have RMDs coming on whether it’s 72 or maybe 70 and a half if it’s an inherited IRA then you can look at qualified charitable distributions so this is where your IRA is going to force you to take out these required minimum distributions as we talked about before but if you don’t need them and you’re terribly inclined well let’s send these directly to a charity and now this reduces your income and you don’t even have to worry about the standard deduction.
It’s just coming right off of instead of that RMD of say 20 000 30 000 or more showing up as income on your income tax return if we send it directly to charity it doesn’t show up at all so that might be a good strategy as well and then a little more complicated a CRT or charitable remainder trust would be okay we’re going to gift assets to the charitable remainder. Trust the income that it generates can come back to you potentially tax free but then the principal upon death goes to a charity so it reduces your income tax liability and also we used to do a lot of these back in the past when there were estate tax issues it also reduces your estate tax. So those are just some of the kind of core tax planning strategies that are available and these aren’t like you only choose one a lot of times these can work hand in hand understanding the tax rules there are certain things that we can do to put ourselves in a much more advantageous position it’s all about looking at taxes, not through a microlens of minimizing taxes in one specific year but minimizing taxes for your retirement and what you leave to the next generation. thank you