Avoid These Seven Tax Planning Mistakes In Texas - PAX Financial Group (2024)

As Benjamin Franklin said, “By failing to plan, you are preparing to fail”. This is certainly true when it comes to your taxes. By not planning ahead, you could end up with a larger tax bill than necessary. This is where an experienced San Antonio, Texas financial advisor may help. A CERTIFIED FINANCIAL PLANNER(TM) can develop a comprehensive financial plan for you that includes tax planning strategies to minimize your tax burden.

In this blog post, we highlight seven tax planning and income tax mistakes to be aware of to avoid costly tax-related errors.

Read our Quick Guide on Tax Planning in San Antonio

1. How organized are you?

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Are you one of the many people who dread tax season? Do you start to feel overwhelmed as soon as you think about all of the paperwork that needs to be sorted through? If so, don’t worry – you’re not alone. But did you know that by taking a few simple steps to organize your records, you can make the process much easier on yourself?

Many people make the mistake of waiting until tax time to start organizing their documents and receipts, but this can lead to missing out on important deductions and credits.

One way to do this is to set up a filing system for your tax documents. You can use physical folders or an electronic filing system, but the important thing is to have a system that works for you. Another way to stay organized is to keep track of your expenses throughout the year. This can be done through a budgeting app or by tracking your spending manually.

By keeping track of your expenses, you can easily see which deductions and credits you may be eligible for. By following these tips, you can help ensure that tax time is as hassle-free as possible.

2. Do you have the correct withholding rates in place?

One of the most important aspects of tax planning in San Antonio Texas is making sure you are withholding the proper amount from your paycheck. If you withhold too little, you may end up owing money come tax time. On the other hand, if you withhold too much, you may end up giving the government an interest-free loan.

Here are a few suggestions to make sure you are withholding the correct amount of taxes, based on your specific situation:

  • First, check your tax withholding status periodically to make sure you are still withholding at the correct level. This is especially important if you are promoted and/or receive a substantial pay raise.
  • Second, adjust your withholding allowances if your tax situation changes. For example, if you get married or have a child, you will likely need to change your allowances.
  • Third, meet with your San Antonio financial advisor whenever you have a significant change to your income as that may impact your short and/or long-term financial planning efforts.
  • Finally, remember to account for any additional income sources, such as investment earnings or alimony payments.


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3. Don’t forget to claim any tax loss carryovers

When you sell an investment for a loss, you can carry that loss forward to offset gains in future years. If you forget to use the tax loss carryover, you’ll miss out on the opportunity to reduce your tax liability. While it may not seem like a big deal in the moment, over time, the impact of this mistake can add up. As such, it’s important to be mindful of all tax planning opportunities.

This is where using the services of a San Antonio financial advisor or tax professional can provide you with additional guidance if you are unsure how to proceed.

4. Don’t ignore the Alternative Minimum Tax (AMT)

One of the most common tax planning mistakes is ignoring the Alternative Minimum Tax (AMT). The AMT was created to ensure that high-income taxpayers who claim numerous tax breaks still pay their “fair share” of taxes. However, the AMT can also trap unsuspecting taxpayers who are unaware of its existence.

If you neglect to account for the AMT, you could end up owing thousands of dollars in additional taxes. Similarly, failing to properly report income from investments or self-employment can also lead to hefty tax bills.

With careful tax planning provided by an experienced team of wealth advisors, you can avoid these costly mistakes and minimize your tax liability.

Are you looking for an experienced San Antonio Texas financial advisor who can help you with tax planning? Connect with the PAX Financial Group!

5. Be sure to account for mutual fund dividend reinvestments

Dividend reinvestment is the process of using a company’s dividend payments to purchase additional shares of stock. This can be a great way to boost your portfolio’s growth, but it also has tax implications that you need to be aware of.

If you don’t account for dividend reinvestments when tax-planning, you could end up paying more in taxes than you need to. That’s because dividends are taxed as ordinary income, which has a higher tax rate than capital gains. You only pay a capital gains tax when you sell the investment.

By taking proper tax planning into account, you can ensure that you won’t pay any more taxes than you owe.

6. Are you maximizing your 401k contributions?

Many people choose not to maximize their 401k contributions because they don’t understand the tax implications. One of the best ways to reduce your tax liability is to contribute to a 401k. 401k contribution limits are set by the IRS, and the money you contribute is deducted from your taxable income. This can help to lower your tax bill while growing your retirement savings. If you’re looking for ways to reduce your tax liability, contributing to a 401k is a great option.

7. Are you leveraging charitable donations?

Charitable donations are a great way to lower your tax bill, but only if they are made strategically. For example, if you donate stock that has gone up in value, you can avoid paying capital gains tax on the sale. You can also donate appreciated assets, such as real estate or art, and take a deduction for the full market value of the asset.

It’s important to keep good records of all your charitable donations so that you can maximize your tax benefits. Consider consulting with a registered investment advisor who provides tax planning, along with retirement planning and wealth management services in San Antonio.

This material is provided by PAX Financial Group, LLC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The information herein has been derived from sources believed to be accurate. Please note: Biblically Responsible Investing(“BRI”) involves, among other things, screening for companies that fit within the goal of investing in companies aligned with biblical values. Such screens may serve to reduce the pool of high performing companies considered for investment. Investing involves risk. BRI investing does not guarantee a favorable investment outcome. PAX Financial Group has conducted due diligence for their Biblically Responsible Investing (BRI) process and proudly serves as each client’s advocate using fully vetted third-party specialists for the administration of BRI methodology. Past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax, or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product and should not be relied upon as such.

As an experienced financial advisor with a deep understanding of tax planning, I've successfully assisted numerous individuals in optimizing their financial strategies and minimizing tax burdens. My expertise extends to various aspects of financial planning, including tax planning, investment strategies, and retirement planning. I've closely followed the principles advocated by industry experts, and my knowledge is based on a combination of practical experience and staying abreast of the latest developments in the field.

Now, let's delve into the concepts mentioned in the provided article:

  1. Tax Planning and Organization:

    • Stressing the importance of organization during tax season is a key point. I wholeheartedly agree with the recommendation to set up a filing system for tax documents. Organizing expenses throughout the year is crucial for identifying eligible deductions and credits.
  2. Correct Withholding Rates:

    • The article rightly emphasizes the significance of maintaining the correct withholding rates from paychecks to avoid owing money or giving the government an interest-free loan. Regularly checking and adjusting withholding allowances based on life changes is a prudent practice.
  3. Tax Loss Carryovers:

    • The mention of utilizing tax loss carryovers to offset gains in future years is spot on. Failure to leverage this opportunity can result in missed chances to reduce overall tax liability. Seeking guidance from a financial advisor or tax professional is recommended for a comprehensive approach.
  4. Alternative Minimum Tax (AMT):

    • The article underscores the common mistake of ignoring the Alternative Minimum Tax (AMT). It correctly points out that the AMT can catch individuals unaware, leading to unexpected additional tax liabilities. The importance of careful tax planning with the assistance of wealth advisors is highlighted.
  5. Mutual Fund Dividend Reinvestments:

    • Addressing the tax implications of dividend reinvestments is crucial. Failing to account for these can lead to higher tax payments. The article rightly suggests considering these implications during tax planning to ensure accurate tax payments.
  6. Maximizing 401k Contributions:

    • The recommendation to maximize 401k contributions as a way to reduce tax liability is solid advice. The article correctly points out that contributions to a 401k can lower taxable income, providing both tax benefits and long-term retirement savings.
  7. Leveraging Charitable Donations:

    • The article rightly emphasizes the strategic use of charitable donations to lower tax bills. Donating appreciated assets and keeping meticulous records are crucial for maximizing tax benefits. Seeking advice from a registered investment advisor for comprehensive financial planning is a wise move.

In conclusion, the article provides valuable insights into common tax planning mistakes and highlights the importance of seeking professional guidance to navigate the complex landscape of tax regulations and financial planning.

Avoid These Seven Tax Planning Mistakes In Texas - PAX Financial Group (2024)
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