Tax Wisdom Principles
Tax season is upon us, which is often associated with pain and distress. The truth is, I don’t think anyone really enjoys paying taxes. It is probably right up there on the list with root canals and Brussel sprouts (although my wife has a really good recipe for roasted Brussel sprouts drizzled with olive oil, so maybe that’s not a good example).
Filing a tax return can be fun if a tax-refund is in order, but it can also be a shock if a large amount is due when April 15 arrives. Whether you are expecting a large refund or a balance due on this year’s tax return, here are a few wisdom principles to remember that may help take the sting out of taxes:
Taxes are always a symptom of a larger blessing. If there were no income or profits to report, there would be no taxes to pay. Accordingly, we encourage our clients to approach paying taxes with a spirit of thanksgiving. One of my mentors, Ron Blue, used to say the following prayer when paying taxes, “Lord, thank you that You’ve given me the income that requires me to pay taxes. Thank you, Father, that you’ve given me the cash to pay the taxes right now. Thank you for blessing me abundantly, and thank you that You desire for Your money to be used in this particular way [to pay taxes]. Amen.”
Paying taxes is a means to honor authority. You've heard the saying, "Give to Caesar what is Caesar’s." While there is a wide spectrum of political views on how government should manage taxes collected, it is our civic duty to report and pay taxes within the requirements of the law.
Minimizing taxes may not always be beneficial to financial success. With respect to investing, it is important to not allow the tax tail wag the dog. Of course, we want to be savvy about taxes to fully take advantage of opportunities within the tax code. However, unless there is a special circumstance, such as a concentrated stock position or other circumstances that warrant careful tax management, it may be better to make decisions based on long-term thinking and market opportunities, rather than allowing taxes to lead the decision-making process.
Still, there are some techniques that may help lower taxes when appropriate. For example, charitable giving can lower your taxes. It is common knowledge that you can claim a deduction for charitable gifts. But did you know you may make charitable gift donations directly out of your pre-tax traditional IRA, and avoid reporting income on the distribution altogether? The IRS made this provision in the code permanent last year, and it may be a great tool if charitable giving is a significant part of your annual spending.
If that is something you are interested in exploring for 2017, feel free to call our office and we would be glad to help.
*The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.