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Key Tips for Filing Your Tax Returns that Maximize Your Refund

Key Tips for Filing Your Tax Returns that Maximize Your Refund

Expert advice from Jonathan Sharg, VP and Financial Advisor for Broadway Wealth Solutions, Inc.

Tax Day 2023 is swiftly approaching. If you’re getting ready to file, you may still have questions about current tax breaks and credits that could make this year’s taxes both more challenging and more rewarding. Jonathan Sharg, VP and Financial Advisor for Broadway Wealth Solutions, Inc.* helps his clients learn how to maximize their tax breaks and minimize tax liabilities. He shares the importance of knowing your tax bracket, qualified vs. non-qualified accounts, tax treatment and how a trusted financial advisor can be your biggest ally. Try adding some of these tips to your tax preparation this season to make filing easier before the April 18 deadline.

Understand your adjusted gross income (AGI) and tax bracket.

The AGI calculation is equal to the total income you report that includes earnings from your job, self-employment, dividends and interest from a bank account. Knowing your AGI plus which tax bracket you are in can help you make better financial decisions. If you’re unsure of which tax bracket you fall under, there are tax income calculators available online that estimate your taxable income. Your AGI and tax bracket can also help inform financial decisions during other times of the year such as discussions around Roth IRAs, tax-loss harvesting, and selling appreciated assets.

Know the difference between a traditional and Roth IRA and contribute to retirement accounts throughout the year.

An IRA is one of the most common retirement savings accounts, and when opening one, you'll need to choose between two main types: Roth or traditional. Knowing the difference between the two will help you select the one that’s right for you and give you insight into how your money is taxed during tax season. The biggest difference between a Roth IRA and a traditional IRA is how and when you get a tax break. You can save on taxes now or later. Contributions to traditional IRAs may be tax-deductible, but withdrawals in retirement are taxable. In comparison, contributions to Roth IRAs are not tax-deductible, but the withdrawals in retirement are tax-free. One of the advantages of a traditional IRA for most people is the upfront tax break. It can be a huge advantage for high earners and a great incentive for people who might otherwise skip saving for retirement. Don’t be afraid to reach out to your banker to discuss retirement accounts and planning. Each financial situation is unique, and an experienced financial advisor can help you think through the short-term and long-term costs of contributions. Overall, contributions to a retirement account are a smart move for two reasons: investing in your future and finding savings on your tax filing.

If you are drawing from your investments, understand how your distributions are taxed compared to ordinary income taxes.

Profits you make from selling most assets are known as capital gains, and they are generally taxed at different rates depending on how long you have held the asset– known as the holding period. Gains you make from selling assets you’ve held for a year or less are called short-term capital gains, and they are generally taxed at the same rate as your ordinary income. Gains from the sale of assets you’ve held for longer than a year are known as long-term capital gains, and they are typically taxed at lower rates than short-term gains and ordinary income, depending on your taxable income. Lower percentage rates probably sound more appealing if you’re holding onto property. Talk with your banker about your options if you are considering selling assets or drawing from your investments. If your investments end up losing money rather than generating gains, you can use those losses to reduce your taxes as well.

“Don’t let the tax tail wag the investment dog.” Not everything is centered around ‘how can I reduce my taxes.’

Although we all want to find tax breaks, investment decisions shouldn’t be made solely from a tax perspective. “Don’t let the tax tail wag the investment dog,” says Sharg. Capital appreciations, dividends and interest are all things to consider when reviewing personal or business assets. For example, tax-free bonds yield lower than taxable bonds. A trick Jonathan uses is looking at after-tax returns to determine any profit made on an investment. Businesses and investors can use the after-tax return to determine their earnings after subtracting the amount due for taxes.

What goes around comes around. It’s ok to overpay on your taxes during the year.

If you receive a refund, most likely you overpaid on your taxes during the year and that’s ok. Some like receiving a lump sum during tax season. It can give you a feeling of empowerment and a sense of financial possibilities. If you’re nervous about owing money during tax time, contributing more to your Federal Tax withholdings throughout the year could be a good strategy to consider. Changing your withholdings percentage or retirement distributions can adjust how much money you take home now, but remember, you might be owed a nice check come income tax season.

New for 2023: Understanding Secure Act 2.0

The recently passed Omnibus spending bill by the Federal government included provisions that have been called Secure Act 2.0. There are a number of minor but important changes to retirement accounts that will impact many individuals and businesses. Examples include pushing back the age Required Minimum Distributions begin, Roth related changes, creation of emergency linked savings accounts, and many more. It is important to consult with a financial professional how these changes may impact your finances.

Consider working with a trusted financial advisor.

If you are concerned about taxes as it relates to your investments, seeking advice from a financial expert can give you added confidence and peace of mind. At Broadway Wealth Solutions, Inc.*, also referred to as BWSI, we strive to give our clients the best financial experience possible, and we know one person cannot do it alone. A team of highly credentialed professionals with decades of experience and unique perspectives, work together to provide our clients with comprehensive proposals for allocation, asset location, protection and distribution. Our bankers are local and understand our communities better than anyone else. First-class customer service is our difference. Our teams are happy to help customers with their tax strategies by answering questions or preparing for future tax returns. Sometimes having a professional working with you every step of the way is the most valuable asset you can have to feel financially confident.

*Broadway Wealth Solutions, Inc., (“BWSI”) is a registered investment adviser located in San Antonio, Texas. Broadway Wealth Solutions, Inc is a wholly owned yet separate entity of Broadway Bank

Disclosure
WARRANTIES & DISCLAIMERS
There are no warranties implied.
Broadway Wealth Solutions, Inc., (“BWSI”) is a registered investment adviser located in San Antonio, Texas. Broadway Wealth Solutions, Inc., may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. Broadway Wealth Solutions, Inc.’s web site is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of Broadway Wealth Solutions, Inc.’s web site on the Internet should not be construed by any consumer and/or prospective client as Broadway Wealth Solutions, Inc.’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet. Any subsequent, direct communication by Broadway Wealth Solutions, Inc., with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of Broadway Wealth Solutions, Inc., please contact the state securities regulators for those states in which Broadway Wealth Solutions, Inc. maintains a registration filing. A copy of Broadway Wealth Solutions, Inc.’s current written disclosure statement discussing Broadway Wealth Solutions, Inc.’s business operations, services, and fees is available at the SEC’s investment adviser public information website – www.adviserinfo.sec.gov or from Broadway Wealth Solutions, Inc., upon written request. Broadway Wealth Solutions, Inc., does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Broadway Wealth Solutions, Inc.’s web site or incorporated herein, and takes no responsibility therefor. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.
This website and information are provided for guidance and information purposes only. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy. This website and information are not intended to provide investment, tax, or legal advice.
Insurance products and services are offered and sold through BWSI and individually licensed and appointed insurance agents.

Not FDIC insured | Not guaranteed by the bank | Not a deposit | Not insured by a federal government agency | May lose value

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