{"id":262768,"date":"2021-05-30T19:16:00","date_gmt":"2021-05-30T16:16:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/how-financial-planning-can-help-you-exhibit-a-selling-your-home-before-getting-married-and-facing-this-avoidable-tax-mistake\/"},"modified":"2021-05-30T19:16:00","modified_gmt":"2021-05-30T16:16:00","slug":"how-financial-planning-can-help-you-exhibit-a-selling-your-home-before-getting-married-and-facing-this-avoidable-tax-mistake","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/how-financial-planning-can-help-you-exhibit-a-selling-your-home-before-getting-married-and-facing-this-avoidable-tax-mistake\/","title":{"rendered":"#\n  How financial planning can help you. Exhibit A: Selling your home before getting married \u2014 and facing this avoidable tax mistake"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3fa90399529\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3fa90399529\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/how-financial-planning-can-help-you-exhibit-a-selling-your-home-before-getting-married-and-facing-this-avoidable-tax-mistake\/#Planning_to_reduce_taxes_is_a_critically_important_piece_of_the_overall_financial-planning_puzzle_Tax_Guy_says\" >Planning to reduce taxes is a critically important piece of the overall financial-planning puzzle, Tax Guy says<\/a><ul class='ez-toc-list-level-6' ><li class='ez-toc-heading-level-6'><ul class='ez-toc-list-level-6' ><li class='ez-toc-heading-level-6'><ul class='ez-toc-list-level-6' ><li class='ez-toc-heading-level-6'><ul class='ez-toc-list-level-6' ><li class='ez-toc-heading-level-6'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/how-financial-planning-can-help-you-exhibit-a-selling-your-home-before-getting-married-and-facing-this-avoidable-tax-mistake\/#What_is_tax_planning\" >What is tax planning?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-6'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/how-financial-planning-can-help-you-exhibit-a-selling-your-home-before-getting-married-and-facing-this-avoidable-tax-mistake\/#Tax_uncertainty_adds_to_the_challenge\" >Tax uncertainty adds to the challenge\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-6'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/buradabiliyorum.com\/en\/how-financial-planning-can-help-you-exhibit-a-selling-your-home-before-getting-married-and-facing-this-avoidable-tax-mistake\/#What_is_financial_planning\" >What is financial planning?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-6'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/buradabiliyorum.com\/en\/how-financial-planning-can-help-you-exhibit-a-selling-your-home-before-getting-married-and-facing-this-avoidable-tax-mistake\/#How_do_tax_planning_and_financial_planning_intersect\" >How do tax planning and financial planning intersect?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-6'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/buradabiliyorum.com\/en\/how-financial-planning-can-help-you-exhibit-a-selling-your-home-before-getting-married-and-facing-this-avoidable-tax-mistake\/#What_happens_if_you_ignore_taxes\" >What happens if you ignore taxes?<\/a><\/li><\/ul><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/buradabiliyorum.com\/en\/how-financial-planning-can-help-you-exhibit-a-selling-your-home-before-getting-married-and-facing-this-avoidable-tax-mistake\/#Exhibit_A\" >Exhibit A<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/buradabiliyorum.com\/en\/how-financial-planning-can-help-you-exhibit-a-selling-your-home-before-getting-married-and-facing-this-avoidable-tax-mistake\/#Exhibit_B\" >Exhibit B<\/a><ul class='ez-toc-list-level-6' ><li class='ez-toc-heading-level-6'><ul class='ez-toc-list-level-6' ><li class='ez-toc-heading-level-6'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/buradabiliyorum.com\/en\/how-financial-planning-can-help-you-exhibit-a-selling-your-home-before-getting-married-and-facing-this-avoidable-tax-mistake\/#The_bottom_line\" >The bottom line\u00a0<\/a><\/li><\/ul><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/buradabiliyorum.com\/en\/how-financial-planning-can-help-you-exhibit-a-selling-your-home-before-getting-married-and-facing-this-avoidable-tax-mistake\/#Bill_Bischoff\" >Bill Bischoff<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong>#<br \/>\n  How financial planning can help you. Exhibit A: Selling your home before getting married \u2014 and facing this avoidable tax mistake<br \/>\n<\/strong>&#8221;<\/p>\n<h2 class=\"article__subhead\" itemprop=\"alternativeHeadline\"><span class=\"ez-toc-section\" id=\"Planning_to_reduce_taxes_is_a_critically_important_piece_of_the_overall_financial-planning_puzzle_Tax_Guy_says\"><\/span>\n  Planning to reduce taxes is a critically important piece of the overall financial-planning puzzle, Tax Guy says<br \/>\n<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><\/p>\n<div class=\"column column--full article__content\">\n<div class=\"article__side\">\n<div class=\"container--sticky not-active\">\n<div id=\"cx-next\">\n              <\/div>\n<\/p><\/div>\n<\/p><\/div>\n<div id=\"js-article__body\" class=\"article__body article-wrap at16-col16 barrons-article-wrap\" itemprop=\"articleBody\" data-sbid=\"WP-MKTW-0000282945\">\n<div class=\"barrons-article-ad-wrapper\">\n<div data-track=\"barrons-article-ad-wrap\" class=\"barrons-article-ad sticky_item\">\n<div class=\"barrons-main-article-ad-target sticky_target body_ad\" aria-hidden=\"true\"><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<p>       If you are affluent or will be in the future, taxes are or will become one of your biggest expenses \u2014 maybe the biggest. And probably getting bigger, depending on how much of President Biden\u2019s tax plan gets through Congress.\u00a0<\/p>\n<p> While some people claim they would love the opportunity to pay more to Uncle Sam, I\u2019m betting you are not one of them.\u00a0<\/p>\n<div class=\"paywall\">\n       If I\u2019m right, this column is for you. It explains what tax planning really means, and why you should care. Here goes:\u00a0\u00a0<\/p>\n<h6><span class=\"ez-toc-section\" id=\"What_is_tax_planning\"><\/span><strong>What is tax planning?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h6>\n<p>Tax planning is the art of arranging your financial affairs in ways that postpone or avoid taxes. In the context of this column, I\u2019m talking about federal income taxes. By employing effective tax-planning strategies, you can increase cash flow and have more money to spend, save and invest. I think that\u2019s a good thing.\u00a0\u00a0<\/p>\n<p>Put another way, tax planning means deferring and\/or avoiding income taxes by taking advantage of beneficial tax-law provisions, increasing and accelerating deductions and credits, and <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/general\/\" data-internallinksmanager029f6b8e52c=\"3\" title=\"General\" target=\"_blank\" rel=\"noopener\">general<\/a>ly making maximum use of tax breaks available under our beloved Internal Revenue Code.\u00a0\u00a0\u00a0<\/p>\n<p>While the federal income-tax rules are now more complicated than ever, the benefits of good tax planning are probably more valuable than ever.\u00a0\u00a0\u00a0\u00a0<\/p>\n<p>This goes without saying, but let\u2019s say it anyway: You should not change your financial behavior solely to avoid taxes. Truly beneficial tax-planning strategies are those that permit you to do what you want to do while reducing tax bills along the way.\u00a0<\/p>\n<h6><span class=\"ez-toc-section\" id=\"Tax_uncertainty_adds_to_the_challenge\"><\/span><strong>Tax uncertainty adds to the challenge\u00a0<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h6>\n<p>For 2018 to 2025, the Tax Cuts and Jobs Act (TCJA) cut federal income-tax rates for most individual taxpayers. But with ongoing huge federal budget deficits exacerbated by the pandemic and with Biden\u2019s tax-increase proposals, who knows how long the TCJA rate cuts will last?\u00a0<\/p>\n<p>While I think some of Biden\u2019s proposed tax increases won\u2019t get through Congress, some might. High-income folks in general, high-income investors, and investment real-estate owners are most likely to be impacted.<\/p>\n<h6><span class=\"ez-toc-section\" id=\"What_is_financial_planning\"><\/span><strong>What is financial planning?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h6>\n<p>Financial planning is the art of identifying and implementing strategies that facilitate reaching your financial goals, be they short-term or long-term in nature.\u00a0While this concept seems simple, its execution can be more complicated.<\/p>\n<div id=\"cx-membership-tile\"><\/div>\n<h6><span class=\"ez-toc-section\" id=\"How_do_tax_planning_and_financial_planning_intersect\"><\/span><strong>How do tax planning and financial planning intersect?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h6>\n<p>Tax planning and financial planning are closely linked, because taxes are such a large expense as you go through life. In fact, if you become really affluent, you will probably find taxes to be your biggest single expense. Therefore, planning to reduce taxes is a critically important piece of the overall financial-planning puzzle.\u00a0\u00a0\u00a0<\/p>\n<h6><span class=\"ez-toc-section\" id=\"What_happens_if_you_ignore_taxes\"><\/span><strong>What happens if you ignore taxes<\/strong>?<span class=\"ez-toc-section-end\"><\/span><\/h6>\n<p>I am continually surprised by how many people fail to get the message about the importance of tax planning until they commit an expensive blunder. Then they finally get it! The trick is to avoid learning this lesson the hard way. To illustrate, consider the following fictional examples:<\/p>\n<h4><span class=\"ez-toc-section\" id=\"Exhibit_A\"><\/span><strong>Exhibit A<\/strong> <span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>You are a 40-year-old professional. You consider yourself to be financially astute, but are not well-versed on taxes. One day, you meet the love of your life. Shortly thereafter, you get married.\u00a0<\/p>\n<p>Before the wedding, you sell your home, which has <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>reciated by $500,000 since you bought it. You intend to move into your new spouse\u2019s home, which is a dump. However, you are a proven genius at remodeling, and you think you can work your magic on the property. Fair enough.<\/p>\n<p><strong>Result without tax planning:<\/strong> For federal income-tax purposes, you have a $250,000 taxable gain on the sale of your home ($500,000 profit minus the $250,000 federal home sale gain exclusion for an unmarried taxpayer).\u00a0\u00a0<\/p>\n<p><strong>Result with tax planning:<\/strong> If you had kept your home and lived there with your new spouse for two years before selling, you could have taken advantage of the much-larger $500,000 home-sale gain exclusion for married couples. That would have permanently avoided $250,000 of taxable gain. If necessary, you could have sold your new spouse\u2019s home. Or you could have kept the place and remodeled it while living in your home for the requisite two years after the marriage.\u00a0\u00a0\u00a0<\/p>\n<p><strong>Conclusion:<\/strong> Tax considerations aside, selling your home probably made good sense. However, selling without considering the tax-smart alternative probably cost you at least $50,000, due to a completely avoidable $250,000 gain taxed at an assumed combined federal and state rate of at least 20%. That $50,000 tax hit (maybe more) is a permanent difference, not just a timing difference. Ouch!\u00a0<\/p>\n<p>The point is, if you ignore taxes, bad things can happen \u2014 even with seemingly sensible transactions.<\/p>\n<h4><span class=\"ez-toc-section\" id=\"Exhibit_B\"><\/span><strong>Exhibit B<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>You leave your job to go work for a different company. You have $200,000 in your 401(k) account with the old company. You want to drain the 401(k) account and roll all the money over tax-free into an IRA. That way, you\u2019ll have complete freedom to manage the money as you see fit.\u00a0\u00a0\u00a0<\/p>\n<p><strong>Result without tax planning:<\/strong> You arrange to receive a check from the 401(k) plan made out in your name. When you get the check, you are surprised to discover that it\u2019s for only $160,000 instead of the expected $200,000.\u00a0<\/p>\n<p>Why? Because 20% was automatically withheld for federal income tax. This is mandatory when the check is made out to you personally. Ugh! Now you cannot accomplish a totally tax-free rollover unless you somehow come up with the \u201cmissing\u201d $40,000 and deposit that amount \u2014 along with the $160,000 you have in hand \u2014 into your rollover IRA within 60 days.\u00a0<\/p>\n<p>Say you fail to raise the $40,000. As a result, you\u2019re taxed on that amount because it was not rolled over. Plus, you\u2019ll owe the federal 10% early-withdrawal penalty tax on the 401(k) withdrawal if you\u2019re under age 55. In most states, you\u2019ll also owe state income tax.\u00a0<\/p>\n<p>Assume the total tax hit on the $40,000 that\u2019s not rolled over amounts to $16,400: $40,000 x (24% federal income rate + 10% federal penalty tax + 7% state income tax rate) = $16,400.\u00a0<\/p>\n<p><strong>Result with tax planning:<\/strong> You arrange to receive a check from the 401(k) plan made out in the name of the trustee for your rollover IRA, or you arrange for an electronic transfer of funds from the 401(k) plan into your rollover IRA.\u00a0<\/p>\n<p>Either way, you accomplish a so-called trustee-to-trustee rollover. Such rollovers are exempt from the automatic 20% federal income-withholding rule. So your rollover IRA receives the full $200,000, and you successfully accomplish a totally tax-free rollover with no muss and no fuss.\u00a0<\/p>\n<p><strong>Conclusion:<\/strong> Aside from not knowing about a tax detail that turned out to be important, your rollover made good sense. However, by doing the rollover \u201cthe wrong way\u201d instead of \u201cthe right way,\u201d you cost yourself $16,400 in completely avoidable taxes. Of that amount, $4,000 is a permanent difference (the 10% penalty tax) and not just a timing difference. Ugh!\u00a0<\/p>\n<p>Again, the point is that bad things can happen if you ignore taxes \u2014 even with seemingly sensible transactions.\u00a0<\/p>\n<h6><span class=\"ez-toc-section\" id=\"The_bottom_line\"><\/span><strong>The bottom line\u00a0<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h6>\n<p>Tax planning is important and worth the effort \u2014 especially if you have a lot at stake and even more so if tax rates are headed up, which seems almost certain sooner or later.\u00a0<\/p>\n<p>The preceding examples are very simple situations that you may already know how to handle. Other situations are more complicated, and you may need professional advice to get the best tax results. In any case, we will do our best to help you out with tax-planning strategies in today\u2019s uncertain environment. Please stay tuned.<\/p>\n<p><strong>See also:<\/strong>\u00a0How do nanny taxes work? They\u2019re complicated, but skipping them is a mistake<\/p>\n<p><strong>Don\u2019t miss:<\/strong> Do you have to pay taxes on withdrawals from 529 college-savings plans? Here\u2019s how to avoid an unpleasant surprise<\/p><\/div>\n<\/div><\/div>\n<p><\/p>\n<div class=\"byline article__byline\">\n<p>      <span>By<\/span><\/p>\n<div class=\"author  hasMenu\" data-scrim='{\"type\":\"author\",\"header\":\"Bill Bischoff\",\"subhead\":\"The Wall Street Journal\",\"list\":[]}' itemscope itemprop=\"author\" itemtype=\"http:\/\/schema.org\/Person\">\n<h4 itemprop=\"name\"><span class=\"ez-toc-section\" id=\"Bill_Bischoff\"><\/span>Bill Bischoff<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/p><\/div>\n<\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/news\/\" target=\"_blank\" rel=\"noopener\">News category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"http:\/\/www.marketwatch.com\/news\/story.asp?guid=%7B20C05575-04D4-B545-7451-4148BFEDB94B%7D&#038;siteid=rss&#038;rss=1\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# How financial planning can help you. Exhibit A: Selling your home before getting married \u2014 and facing this avoidable tax mistake &#8221; Planning to reduce taxes is a critically important piece of the overall financial-planning puzzle, Tax Guy says If you are affluent or will be in the future, taxes are or will become&#8230;<\/p>\n","protected":false},"author":1,"featured_media":262769,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[70897],"tags":[],"class_list":["post-262768","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/262768","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=262768"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/262768\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/262769"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=262768"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=262768"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=262768"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}