Tax Planning

Tax planning is the analysis and arrangement of a person’s financial situation in order to maximize tax breaks and minimize tax liabilities in a legal and efficient manner. Tax planning involves understanding your tax bracket, the difference between tax deductions and tax credits, and the timing of income and expenses. Tax planning can help you reduce your tax bill and save money for your financial goals.

Plan For Your Goals Service Areas

  • Adjusting strategies for changes in tax policy
  • Adjusting tax withholdings and allowances
  • Analyzing options to maximize the qualified business income (QBI) deduction
  • Charitable giving location planning (donor advised funds (DAF), appreciated stock, etc.)
  • Curation of tax professionals
  • Leveraging college tax credits
  • Reviewing annual tax return
  • Review estimated taxes
  • Roth conversion analysis
  • Standard vs. itemized deduction analysis
  • Effective use of employer health reimbursement arrangement (HRA) and flexible spending account (FSA)
  • Stock option exercise and sale planning
  • Strategies for accelerating/deferring business income
  • Tax bracket management
  • 0% capital gains harvesting
  • Tax loss or gain harvesting analysis
  • Tax credit analysis and opportunities

How Will Plan For Your Goals Help With My Tax Planning?

David can help you with your tax planning in several ways. Some of the ways are:

  • Analyze your financial condition and help you create a comprehensive and tax-efficient plan that covers various aspects of your financial goals, such as retirement, investing, estate, and college financing.
  • Advise you on tax implications of your financial decisions and help you choose the best options for your tax bracket, deductions, credits, and other tax-saving opportunities.
  • Keep you updated on the current tax legislation and financial product developments and help you adjust your plan accordingly to avoid any tax penalties or missed opportunities.
  • Work with your tax preparer to ensure that you file your taxes correctly and on time.

What Role do Roth Conversions Play in My Tax Planning Strategy?

Roth conversions play an important role in your tax planning strategy because they can help you reduce your future tax liabilities and diversify your tax situation in retirement. A Roth conversion is a process of moving funds from a pre-tax or after-tax 401(k) or IRA account to a Roth account within the same plan or provider. By doing so, you pay taxes on the conversion amount at your current rate and enjoy tax-free growth and withdrawals in the future, as long as you follow the Roth rules.

Some of the benefits of Roth conversions are:

  • You can bypass the income limits for Roth contributions and take advantage of the tax-free benefits of a Roth account.
  • You can avoid required minimum distributions (RMDs) from your Roth account, unlike traditional 401(k) or IRA accounts that mandate withdrawals after ages 72 to 75 (depending on your birth year).
  • You can hedge against future tax increases by paying taxes at your current rate, which may be lower than your future rate.
  • You can leave a tax-free legacy to your heirs, who can inherit your Roth account and enjoy tax-free withdrawals as well.

Some of the challenges of Roth conversions are:

  • You need to pay taxes upfront on the conversion amount, which may increase your tax bill and reduce your cash flow in the short term.
  • You need to consider the impact on your adjusted gross income (AGI), which may affect your eligibility for other tax deductions, credits, or benefits.
  • You need to follow the five-year rule, which requires you to wait at least five years after the conversion before you can withdraw earnings from your Roth account without penalty.
  • You need to evaluate your tax situation carefully, as a Roth conversion may not be beneficial if your tax rate drops significantly in retirement or if you plan to use your Roth dollars early in retirement.

What Role Does Loss or Gain Harvesting Play in my Tax Planning Strategy?

Loss or gain harvesting plays a significant role in your tax planning because it can help you optimize your tax bill by strategically selling securities or assets at a loss or a gain to offset taxes owed on other investments or income. Loss or gain harvesting can be done at any time, but often near the end of the year.

Some of the benefits of loss or gain harvesting are:

  • You can reduce your taxable income by selling investments that are down and using the losses to offset gains from other investments or up to $3,000 of ordinary income per year. You can also carry over any unused losses to future years indefinitely.
  • You can avoid or minimize capital gains tax by selling investments that are up and using the gains to offset losses from other investments or up to $3,000 of ordinary income per year. You can also carry over any unused gains to future years indefinitely.
  • You can rebalance your portfolio by selling investments that are not aligned with your target asset allocation and buying similar but not identical investments that are more suitable for your risk tolerance and goals.

Some of the challenges of loss or gain harvesting are:

  • You need to comply with the IRS rules on wash sales, which prohibit you from buying a substantially identical investment within 30 days before or after selling an investment at a loss. If you violate this rule, you will lose the benefit of the loss for tax purposes.
  • You need to consider the impact on your long-term returns by selling investments that may have future growth potential or that may pay dividends or interest. You should also factor in the transaction costs and fees associated with selling and buying investments.
  • You need to evaluate your tax situation carefully, as loss or gain harvesting may not be beneficial if your tax rate is low or if you don’t have any gains or income to offset. You should also consider the state and local taxes that may apply to your transactions.

What Role Does Charitable Giving Play in My Tax Planning Strategy?

Charitable giving plays a vital role in your tax planning because it can help you support the causes you care about and save on your taxes at the same time. Charitable giving involves donating money or assets to qualified charitable organizations that are recognized by the IRS as 501(c)(3) entities. By doing so, you can claim a tax deduction for the amount or value of your donation, subject to certain limits and rules.

Some of the benefits of charitable giving are:

  • You can reduce your taxable income by itemizing your deductions and claiming the charitable contribution deduction on your tax return. You can deduct up to 60% of your adjusted gross income (AGI) for cash donations and up to 30% of your AGI for non-cash donations.
  • You can avoid or minimize capital gains tax by donating appreciated assets, such as stocks, bonds, or real estate, to charity. You can deduct the fair market value of the asset and avoid paying tax on the appreciation.
  • You can plan for your estate and legacy by naming a charity as a beneficiary of your will, trust, retirement account, or life insurance policy. You can reduce or eliminate the estate tax on the assets you leave to charity and ensure that your philanthropic goals are fulfilled after your death.

Some of the challenges of charitable giving are:

  • You need to itemize your deductions to claim the charitable contribution deduction, which may not be beneficial if your standard deduction is higher than your total itemized deductions.
  • You need to comply with the IRS rules on substantiating and reporting your donations, which may vary depending on the type, amount, and recipient of your donation. You need to obtain written acknowledgment from the charity for any donation of $250 or more and file Form 8283 for any non-cash donation of more than $500.

You need to evaluate your financial situation carefully, as charitable giving may not be beneficial if you have limited cash flow, high debt, or other financial obligations. You should also consider the impact of your donation on your personal and family goals and needs.

Simple Path to Improve Your Financial Condition

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Step 1:

Select a Consultation Service

My services are designed to be flexible and meet your needs. Whether you're looking for a basic evaluation, help with a key area of your finances, or comprehensive financial planning, you'll find it here.

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Step 2:

Understand Your Real Financial Condition

Working together we will determine your financial needs. We’ll assess what is effective or problematic, and what is hindering your progress. With a clear understanding of your financial condition, you can make smarter choices.

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Step 3:

Plan a Better Future

Getting the knowledge and guidance you need from a financial professional is an investment in your security and hope for the future. And it’s not just for you, but for the people who depend on you.

David Roberts - Financial Planner and Advisor of Plan For Your Goals

David Roberts, Owner: Plan For Your Goals

You Deserve a Better Future

Affordable financial advice with flexible options that fit into your tight schedule can be difficult to find. That's why so many people struggle to make smart money decisions. At Plan For Your Goals my clients get the financial planning, coaching, and resources they need to make better decisions and plan a better future.