Reducing Expenses and Minimizing Taxes

Last week, my daughter asked for advice (obviously, she’s no longer a teenager): how can I balance my budget? I told her, among other tips, to control two things – reduce your expenses and minimize your taxes.

What works for my family works for others.  That’s why Carofin encourages setting up a Self-Directed IRA custodian account to consider investing in private placements, if allowed, through any form of retirement account, including IRAs.

If your IRA custodian allows you to invest in private companies (Carofin can recommend one, if it doesn’t), you’ll likely be investing in a tax-advantaged manner.  So, what does that mean?

By contributing to a Traditional IRA, you may be able to deduct a portion or all your contributions from taxes. Note: This depends on your income range and filing status and whether you and/or your spouse are covered by a retirement plan at work. Please consult your tax advisor. The investments, both in a Roth or Traditional IRA, grow tax-free, up to a certain limit. But, when making withdrawals from a Traditional IRA, the investor must pay ordinary income tax.

Contributions to a Roth IRA, on the contrary, do not provide a tax deduction because these are made with after-tax dollars. However, unlike a Traditional IRA, withdrawals are tax-free, again with certain limitations.

So, after convincing my daughter to minimize her taxable assets, the rest was easy. Do her research: some self-directed IRA custodians charge significantly higher fees than others, and those cut into the growth of her assets. Carofin can help with this as well.

To help reduce your expenses and minimize your taxes on private company investments, talk to me today.  Carofin is not an investment or a tax advisor. Please consult your tax advisor.


[1] Subject to limitations. Please consult your tax advisor.





In the interest of accessibility, here are some terms that any investor should be familiary with.