I have to pay taxes on a short sale. Does it help if I start contributing to my 401k to reduce taxable income?
Monday, September 6th, 2010 at
2:49 am
I short-sale my property in 2008. I’ll receive a 1099 from lender with "gains" for ,000. I don’t know what to do to minimize my tax exposure. I was thinking about start contributing as much as possible to my 401k plan during this year to reduce my taxable income. Is this a good idea? What else can I do?
Filed under: 401k
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see a good tax accountant. Pay the money…it’s worth it. But yes, maximizing 401k will help though won’t eliminate the tax. Basically will cut it in half. (assuming 15% capital gains rate versus 28% ordinary income rate).
Can’t hurt to put money into a 401K, but isn’t going to make much of a dent in the tax you have to pay if you have to pay tax on the $60,000.
See if you qualify for recently passed relief using IRS Form 982 http://www.irs.gov/irs/article/0,,id=179073,00.html
You can open an IRA and put $5000 in it to subtract from your income….duh.
What you need to do is develop a relationship with a tax consultant or financial planner who is savvy in tax matters. Buy some face time and avoid these bad tax surprises. Get control of your financial life
A 401(k) is always a good idea. But it won’t help you for last year.