Tax Tip That Could Save You Big in 2017

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Tax Tip That Could Save You Big in 2017

Just about everyone enjoys finding new ways to save on taxes. Even though the tax season is winding down for many, that doesn’t mean you should put taxes completely out of mind. In fact, making important tax decisions right now can pay huge dividends later on down the road. For example, there is one thing that you can do today that would end up giving you more tax-free money later. Yes, you would have to pay more in taxes right now, but the benefits would likely outweigh the immediate expense. We’re talking about converting a traditional IRA into a Roth IRA. This could be a tough choice for many, especially if you don’t currently have the disposable income needed to take the tax hit. However, another nice feature of a Roth IRA is that it comes with the ability to undo it if you change your mind (but the change is time-sensitive).

2017 Might Be the Best Time

There are several reasons to consider converting your traditional IRA into a Roth IRA, but this year, in particular, it could have a huge impact. Because lawmakers are working on tax reform, including a big overhaul to the nation’s tax brackets the advantages of converting it in a year or two could be gone. Congress could also decide to speed up withdrawals from inherited IRAs, which would likely mean a Roth conversion during estate planning would not be as beneficial.

Big Tax Savings Are Possible

Want more reasons to seriously consider converting your IRA to a Roth? Currently, stock prices have risen to record levels. So what if the market suddenly takes a large dip after you convert? Reversing the transaction, which you could still do until October 15, 2018, would likely save you from paying taxes on the value that your IRA has lost. The advantage of a Roth is that it is made up of after-tax money, which means when you withdraw it you do not have to pay taxes on it. It also allows you to turn all that pretax money from a traditional IRA into after-tax savings. These types of conversions are becoming more popular with baby boomers because many of them are retiring with significant amounts of pretax savings in their IRAs and 401ks.

Other Benefits

Of course, there is no one-size-fits-all answer to this question. Converting a traditional IRA into a Roth IRA is not the right move for everyone. However, it is generally considered a good move if you currently find yourself in a lower tax bracket but you believe you will most likely end up in a higher tax bracket later on down the road. And of course, you should have enough disposable cash in order to pay for the upfront tax hit that will occur when you make the conversion. One other nice feature of Roth IRAs is that you can withdraw money without paying a tax penalty because it’s money you’ve already paid taxes on. Therefore, if an emergency arises and you have to tap into your account, you won’t face any extra charges for withdrawing it early.

We hope you found this article about “Tax Tip That Could Save You Big in 2017” helpful.  If you have questions or need expert tax or family office advice that’s refreshingly objective (we never sell investments), please contact us or visit our Family office page  or our website at www.GROCO.com.  Unfortunately, we no longer give advice to other tax professionals gratis.

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Alan Olsen, CPA

Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of GROCO.com.  GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world.

Alan L. Olsen, CPA, Wikipedia Bio

 

 

GROCO.com is a proud sponsor of The American Dreams Show.

 

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The American Dreams show was the brainchild of Alan Olsen, CPA, MBA. It was originally created to fill a specific need; often inexperienced entrepreneurs lacked basic information about raising capital and how to successfully start a business.

Alan sincerely wanted to respond to the many requests from aspiring entrepreneurs asking for the information and introductions they needed. But he had to find a way to help in which his venture capital clients and friends would not mind.

The American Dreams show became the solution, first as a radio show and now with YouTube videos as well. Always respectful of interview guest’s time, he’s able to give access to individuals information and inspiration previously inaccessible to the first-time entrepreneurs who need it most.

They can listen to venture capitalists and successful business people explain first-hand, how they got to where they are, how to start a company, how to overcome challenges, how they see the future evolving, opportunities, work-life balance and so much more..

American Dreams discusses many topics from some of the world’s most successful individuals about their secrets to life’s success. Topics from guest have included:

Creating purpose in life / Building a foundation for their life / Solving problems / Finding fulfillment through philanthropy and service / Becoming self-reliant / Enhancing effective leadership / Balancing family and work…

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MyPaths.com (Also sponsored by GROCO) provides free access to content and world-class entrepreneurs, influencers and thought leaders’ personal success stories. To help you find your path in life to true, sustainable success & happiness.  It’s mission statement:

In an increasingly complex and difficult world, we hope to help you find your personal path in life and build a strong foundation by learning how others found success and happiness. True and sustainable success and happiness are different for each one of us but possible, often despite significant challenges.

Our mission at MyPaths.com is to provide resources and firsthand accounts of how others found their paths in life, so you can do the same.

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