In light of the potential changes to tax policy I have been fielding and or actively engaging in conversation as of late with clients as to strategies that we have to help clients mitigate their tax liability. While we are not CPA’s and do not give tax advice, we do have solutions that can help and can work alongside CPA’s and accountants to help you reduce your tax liability. Here are some ideas.
1. Retirement Accounts – There are numerous types of retirement accounts available. The obvious and most often used are the ROTH IRA and the traditional IRA. Both of these have their own form of tax benefit. Retirement accounts are probably the number one way that clients can reduce their annual tax liability by maxing them out on an annual basis. We can help advise on what type of retirement account makes the most sense for your situation and in turn help you reduce your annual tax liability.
2. Tax Loss Harvesting – Tax loss harvesting is a form of offsetting taxable gains with losses and in turn reducing annual tax liability on capital gains. While we already work actively to tax loss harvesting in our portfolios, we also have more active strategies available to those whose circumstances allow and or require additional tax loss harvesting.
3. Donor Advised Funds and Qualified Charitable Distributions – If you’re ready to invest in the people and community around you and help those that need it the most The Donor Advised Fund can provide an immediate income tax deduction for donors and allow you as a Donor to enjoy the benefits of your own private foundation with much less work. The Qualified Charitable Distribution for those that qualify will allow you to take an otherwise taxable required minimum distribution from an IRA and donate it to a charity and in turn not be responsible for the tax liability on said required minimum distribution.
4. Work closely with your CPA and Estate Planner – There is a big difference between a tax planner and a tax preparer. A client (who also happen to be a CPA) likens tax preparers to historians who look back at the prior year and prepare a return based on what’s already happened. A tax planner on the other hand will work with you to actively help you manage your annual tax liability and work within the IRA guidelines to minimize it. Estate Planners working in the field of advanced planning can also help you mitigate Estate Taxes.
These are just a few ideas of the conversations being had with clients. The conversation is ever changing as are the policies driving all of the above. With that being said it is important to engage qualified professionals on your behalf to help mitigate and manage your tax liability. We are always happy to help to the extent that we can and where we cannot we are always happy to make introductions to other professionals to help advise you and or work alongside your current advisors. Thanks for reading and if you have any questions as always feel free to contact us.