Reducing your Lifetime Tax LIability
Tax Planning
Your tax return tells the story of last year. Your financial plan should shape the story of the decades ahead. Your 1040 is the end of your CPA’ process, it’s the beginning of ours.
(1) Annual tax projections help eliminate April surprises
(2) Multi-decade projections help reduce lifetime tax liablity
Tax Planning vs Tax Filing
Your CPA is your historian who takes the previous years’ financial decisions and figures out how to optimally file your tax return with the IRS. We are your futurist.
We take your CPA’s final product (your tax return) and build projections on it to look for opportunities to lower taxes in the coming years and identify moves you can make now that will reduce your taxes over your lifetime.
Each year we’ll analyze your tax return alongside your long-term projections to identify opportunities to lower your life-time taxes. And we’ll do a detailed projection of what next year’s taxes will look like to identify opportunities and avoid surprises come April.
Annual Tax Planning
Detailed projection of next year’s liability
Maximizing deductions & credits
Properly setting withholdings and estimated tax payments
Utilizing tax-advantaged accounts optimally
Multi-Decade Tax Planning
Shifting income from higher-tax years to lower-tax years
Optimizing timing of key deductions and credits
Taking full advantage of tax planning windows
Avoiding tax torpedos
What does Tax Planning Mean?
Tax Planning is available as part of our comprehensive planning service or as a stand-alone hourly service. Tax planning can take many forms, but some key elements include:
Taking Advantage of Tax Planning Windows
Throughout your life you’ll have ‘unusual’ tax years, when your taxes are artificially lower (or higher) than what is projected for other years of your life. When this happens we have a rare opportunity to realize some additional income in the eyes of the IRS – causing you to pay taxes at a lower rate today and avoid those taxes at higher rates later.
These windows can be created through planned life events such as retirement, maternity/paternity leave, starting a business, or real estate transactions – or through the surprises life throws at us such as a job loss, tax law changes, economic downturns, or qualifying for a tax credit.
Avoiding “Tax Torpedoes”
One of the challenges with managing taxes is the complex and intertwined tax code. “Tax torpedoes” are situations where a small change in income triggers additional parts of the tax code or other laws, resulting in new taxes and increased tax costs to you. We help clients to proactively manage their finances to avoid “tax torpedoes” that could result in such things as eliminating deductions or tax credits, increasing Medicare premiums, triggering net investment income tax, alternative minimum taxes, and more.
Tax-Efficient Asset Locations
Traditional tax-deferred accounts, Roth accounts, and standard taxable accounts each have unique tax profiles with advantages and disadvantages. By matching the characteristics of the investments with the tax characteristics of the account, we can lower the drag taxes make on your portfolio – even in accounts without any tax benefits.
We strategically weight your portfolio’s investments in each account type to take advantage of these attributes and minimize your lifetime taxes. Our planning also withdraws funds from your tax-deferred, Roth, and taxable accounts in an order that minimizes taxation. Your optimal strategy will depend on your lifetime tax brackets and your goals for your money.