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Tax Savings Tips: November 2021

  2021 Year-End Tax-Planning Edition 2021 Last-Minute Year-End General Business Income Tax Deductions   Your goal should be to get the IRS to owe you money. Of course, the IRS is not likely to cut you a check for this money (although in the right circumstances, that will happen), but you’ll realize the cash when you pay less in taxes.   Here are six powerful business tax-deduction strategies that you can easily understand and implement before the end of 2021.   1. Prepay Expenses Using the IRS Safe Harbor   You just have to thank the IRS for its tax-deduction safe harbors. IRS regulations contain a safe-harbor rule that allows cash-basis taxpayers to prepay and deduct qualifying expenses up to 12 months in advance without challenge, adjustment, or change by the IRS.   Under this safe harbor, your 2021 prepayments cannot go into 2023. This makes sense, because you can prepay only 12 months of qualifying expenses under the safe-harbor rule.   For a cash-basis t

Tax Savings Tips: October 2021

  Taxation of 529 College Savings Account Withdrawals   The big advantage of 529 plans is that qualified withdrawals are always federal-income-tax-free—and usually state-income-tax-free too.   What you may not know is that not all 529 withdrawals are tax-free qualified withdrawals, even in years when you have heavy college costs.   Here are six important points to know about 529 withdrawals.   Point No. 1: You Usually Have Several Payment Options   Say you are the 529 account owner or plan participant . Plans commonly use both terms to describe the person who established and controls the account. This letter will use account owner.   As the account owner, y ou can generally have a withdrawal check cut in your own name or have an electronic deposit made into your own account.   Alternatively, you can have a withdrawal issued in the name of the account beneficiary (the college student for whom you set up the 529 account, usually a child or grandchild) or