In 2017, the Tax Cuts & Jobs Act (TCJA) brought a new set of laws that temporarily adjusted tax brackets and lowered the average tax burden for many taxpayers. A lot of the changes of TCJA expire at the end of 2025, so without any congressional action the current law reverts to their previous structure.
As your advisor, we strive to continually add value to your financial situation now and into the future. A key aspect of this is tax planning—an essential part of financial planning that aims to optimize your tax situation over the long term.
What is involved in tax planning?
Tax planning involves reviewing your current tax situation or previous year’s tax return to identify strategies that minimize your lifetime tax liability. Unlike tax preparation, which is typically handled by your CPA or through online services like TurboTax, tax planning is a proactive approach. It encompasses various strategies based on current tax laws and common knowledge to ensure you pay the least amount of tax over your lifetime.
Here are some common areas we might explore:
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- Roth Conversions: Paying income tax on pre-tax retirement assets to gain tax-free growth moving forward.
- Roth IRA vs. Traditional IRA: Comparing these options to determine which best suits your financial goals and current situation.
- Charitable Giving Strategies: Utilizing Donor-Advised Funds and Qualified Charitable Distributions to maximize the impact of your charitable contributions.
- Tax Loss Harvesting: Realizing a loss in the portfolio to offset realized gains, thus lowering your capital gains tax bill.
- Health Savings Accounts (HSAs): Leveraging HSAs for tax advantages related to healthcare expenses.
- Municipal Bonds: Exploring tax-free income opportunities.
- Distribution Strategies: Planning for tax efficiency throughout your retirement and investment distributions. This might include pulling money from pre-tax and Roth accounts simultaneously to stay within a desired tax bracket.
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Effective tax planning can lead to substantial savings over time. If you’re interested in exploring how tax planning can benefit you or want to discuss specific strategies, don’t hesitate to contact us.
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Pittenger & Anderson, Inc. does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Additionally, the information presented here is not intended to be a recommendation to buy or sell any specific security. To learn more about our firm and investment approach, check out our Form ADV.
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