Tips For Optimizing Your Tax Bill

Written by: Michael Carbone, CFP®

For anyone with above average income, paying taxes may seem onerous. So, what can the high wage earner do to maximize wealth through tax-efficiency?

To preface, I’m not an Accountant – the scope of my role with respect to tax planning is to identify potential opportunities or avoid making mistakes, that may result in less tax outflows for a client – the goal being to maximize wealth. We ultimately rely on the client’s Tax Adviser to ratify any tax-related decision. Here’s a framework I use with clients to tackle this issue.

First gain an understanding around how someone reduces their tax outflows. In most cases, you’re either trying to reduce your taxable income, or an investment tax liability in a non-retirement account.

Next, create a list of ways this may be accomplished (reducing taxable income and investment tax liabilities). Some common examples:

• Saving in retirement accounts (401k, IRA, 403B, etc.)
• Saving in other tax-deductible accounts (Health Savings Accounts, etc.)
• Utilize investment losses when making other investment decisions (tax loss harvesting)
• Gifting appreciated securities instead of making donations from a checkbook
• Being mindful of “tax-drag potential” when building a portfolio (e.g., products distributing capital gains, etc.)
• Utilize 0% capital gains if available in retirement
• Take advantage of potentially “lower cost” Roth conversion opportunities in years of low income
• Inform yourself on taxes with any share-based compensation e.g., ISO’s vs RSU’s
• The list goes on…

Next, Identify which of these opportunities may apply to you and check for any limitations e.g., income thresholds, etc. You also want to view these opportunities in the context of your financial situation, e.g., can you afford to put x$ in a 401k? Finally, ask your CPA for any further suggestions and their endorsement. Now execute!

If you have any questions or would like discuss my content in greater depth, please feel free to reach out to me at Michael.carbone@raymondjames.com or set-up a 15-minute call.

Michael Carbone, CFP^®

Eppolito Financial Strategies, LLC is not a registered broker/dealer and is independent of Raymond James Financial Services.

Any opinions are those of Michael Carbone - not necessarily those of Raymond James. The foregoing information has been obtained from sources considered to be reliable, but we not guarantee that is accurate or complete. Expressions of opinion are as of this date and are subject to change without notice. Investing involves risk and you may incur a profit or loss regardless of strategy selected.

Past performance is not indicative of future results and there is no assurance that any investment strategy will be successful.

Financial and investment planning inherently involve potential tax and legal implications, with which we are generally familiar. We do not, however, practice as lawyers or CPAs and cannot give specific legal or tax advice. You should always consult with your tax advisor, or your attorney, when making complicated legal or tax decisions, however, we’re glad to work with your tax or legal professional to help you meet your financial goals. Raymond James financial advisors do not render advice on tax or legal matters.