Kavan Choksi Discusses a Few Tax Tips For an Individual Investor

It is important for all investors to plan their finances in a proper, systematic manner. Financial plans must never be made for a temporary goal, and has to be designed while keeping the aspect of taxes in mind. As per Kavan Choksi, with proper tax planning, an individual investor can not only reduce their tax liability but also may end up saving towards the various goals they have set at varied life stages.

Kavan Choksi highlights certain tax saving tips that can be beneficial for individual investors

There is a range of simple tax tips for investing, reporting and record keeping that applies to most investors and can help them to save money. First of all, investors can easily limit capital gains on the sale of mutual fund shares by choosing to reinvest dividends into the fund automatically. Reinvested dividends shall increase the investments in the fund, and cut down the taxable gain of the investor in an effective manner. While reducing the taxable income in this situation may not seem like a major difference, failing to take advantage of this rule can actually cost investors a lot in the long run. If they miss out on tax savings today, they invariably lose the potential compounded growth such extra dollars might have earned in the future. The tax-adjusted returns will suffer as well, in case a person forgets to consider reinvesting one year after the other. It is imperative that they keep proper records of the reinvested dividends, and subsequently review the tax rules applicable to the situation every tax season.

As the stock market badly performs, investors start to look elsewhere for places to put their money. A lot of them find bonds to be the ideal investment instruments, as they often perform counter to equities and offer interest income. Moreover, investors may not have to pay taxes on all the interest they receive. In case they purchase the bond in-between interest payments, the investors are unlikely to have to pay tax on the accrued interest prior to their purchase. They must still report the whole interest amount received, but shall get to subtract the accrued amount on a separate line.

Municipal bonds can also provide good tax advantages. As mentioned by Kavan Choksi, these bonds are commonly issued by local, government or state municipalities to finance a particular project. Most municipal bonds are issued with tax-exempt status. This basically means that the interest generated by them does not need to be claimed when they file the tax return.

Investors who put their money in small business ventures or are self-employed might be able to write off a number of operating expenses. For example, in case they take business trips during the year that requires them to acquire accommodations, the expense associated with meals and lodging might be written off as a business expense within particular limits depending on where they travel. If one has to travel frequently for business, forgetting to include these types of seemingly personal expenses may end up forfeiting a good amount of tax savings.