Anything else we should be doing?

[NewPerspective]

Hello!

I just want to do a sanity check and make sure there isn't anything obvious I'm missing...... I'm trying to make sure that we are reducing our tax burden as much as we can.  We pay a lot in taxes and obviously want to make sure we do every reasonable thing we can.

Total combined income is about 250k (this doesn't include stock sales)
No kids
one Mortgage (very low interest rate)
We both max out 401k
DH has an HSA plan that he contributes to

My husband purchases stock in the company he works for.  We have recently been selling some of it in order to diversify but that causes us to be hit with capital gains taxes. Pretty painful even after we have held it for at least a year.  This past Monday was a sad day in our house!

Anything obvious that I'm missing that could help us save on taxes?

Thank you!!!

[MDM]

- Both of you get HDHP coverage so you can contribute the family max to HSAs.
- Backdoor Roth IRAs

See also https://www.bogleheads.org/wiki/Tax-efficient_fund_placement and https://www.bogleheads.org/forum/viewtopic.php?t=79900.

[NewPerspective]

- Both of you get HDHP coverage so you can contribute the family max to HSAs.
- Backdoor Roth IRAs

See also https://www.bogleheads.org/wiki/Tax-efficient_fund_placement and https://www.bogleheads.org/forum/viewtopic.php?t=79900.

Thanks MDM, you are always so helpful!

Forgot to mention we also max out Roths for both of us.  My husband does max his HSA (not sure what HDHP is?).

Thanks for the links!  I'll check them out.

[Jack]

Well, you could have kids or get a more expensive mortgage. (Although those things would save on taxes, they may or may not help your overall finances. Maybe if you didn't spend much on the kids and if the mortgage were for a quad-plex from which you collected three doors worth of rent...)

Forgot to mention we also max out Roths for both of us.  My husband does max his HSA (not sure what HDHP is?).

High Deductible Health Plan (i.e., the type of insurance that makes you eligible for an HSA).

[BlueLesPaul]

In addition to MGM and Jack, you could consider starting a side hustle and deduct the losses from the business, but the IRS will look at several factors to make sure the business is intended to make a profit, including a presumption of profit if you have a profit in 3 of 5 years, so the utility will be limited.  https://www.irs.gov/publications/p535/ch01.html

Rental property are also out since the $25,000 loss allowed to offset nonpassive income with rental losses phases out at $150,000

Children will help, but the child tax credit phases out at $130K, so you will only get the exemption (which will still be north of $1,000 per child since you are in the 28% bracket).

If tax efficiency is your main concern, try to shift as much of your ordinary income to capital gains (easier said than done).

[tonysemail]

I have the same questions too... what else should I be doing or what tips and tricks have I missed?

I will go ahead and toss out a recommendation to start a Donor Advised Fund.
Years ago, I was recommended to start one, but I didn't start it until this year.
Now that I've done it, I can say that it worked out very well for my ESPP shares.
You get to shelter capital gains and deduct the FMV of the shares.
In my case, I get almost double the value by donating shares instead of selling them, paying tax and then donating cash.
There are also some ancillary benefits, like accelerating tax deduction to the current year in case you plan to retire soon.

In my case, I can anticipate donating X dollars/year to each school that my kids attend.
So there's no cash lost if I donate 10X this year vs donating X/year.
This is simply a more tax efficient way of accomplishing my goal.
(this clearly would not apply to a for profit school, but my kids are going to public school)

There are many articles that discuss the benefits, like this one-
http://jlcollinsnh.com/2012/02/08/how-to-give-like-a-billionaire/

and here's an example from fidelity with some numbers-
http://www.fidelitycharitable.org/giving-strategies/tax-estate-planning/appreciated-securities.shtml

[BlueLesPaul]

I have the same questions too... what else should I be doing or what tips and tricks have I missed?

I will go ahead and toss out a recommendation to start a Donor Advised Fund.
Years ago, I was recommended to start one, but I didn't start it until this year.
Now that I've done it, I can say that it worked out very well for my ESPP shares.
You get to shelter capital gains and deduct the FMV of the shares.
In my case, I get almost double the value by donating shares instead of selling them, paying tax and then donating cash.
There are also some ancillary benefits, like accelerating tax deduction to the current year in case you plan to retire soon.

In my case, I can anticipate donating X dollars/year to each school that my kids attend.
So there's no cash lost if I donate 10X this year vs donating X/year.
This is simply a more tax efficient way of accomplishing my goal.
(this clearly would not apply to a for profit school, but my kids are going to public school)

So with your ESPP, do you avoid the tax for the up-to-15% discount at the time of option and/or the option spread with a Donor Advised Fund?

[tonysemail]

that's a good question and the ordinary income is NOT sheltered by charitable gift.
see this for the details-
http://www.fidelitycharitable.org/giving-strategies/advisors/qa/employee-stock-tax-consequences.shtml