The cost of income tax is a crucial part of overall wealth management and our team at Smith Anglin works diligently to mitigate or lesson the tax cost of both retirement and investment income. We have a dedicated team of CPAs that work alongside our wealth advisors to make sure you are not only meeting your investment goals but doing it in a tax-efficient way. In this blog post we will share 3 ways we help our clients maximize their investment return while minimizing the associated tax liabilities.
Three of the most common ways we reduce our clients tax burdens are through:
- Roth Conversions
- Tax Loss Harvesting
- Tax-Exempt Investments
a method of moving retirement assets from a Traditional or company retirement plan to a Roth IRA. This strategy provides several benefits for our clients. The first is that unlike a Traditional IRA, a Roth RIA allows you to grow your investments and take qualified distributions tax-free.
Another benefit of converting to a Roth IRA, is the ability to bypass the Required Minimum Distributions or RMDs that start at age 72 with a Traditional IRA. Eliminating these RMDs can lead to lower Medicare Premiums and reduce tax on Social Security. Our team of CPAs works closely with our advisors to optimize conversion amounts for the most advantageous future tax benefits.
Tax Loss Harvesting:
This is the practice of selling securities that will generate capital losses to offset capital gain income. By using this strategy, we can keep our client’s taxable income free of the large increases that often come with capital gains and allow their investment portfolio to grow faster since money isn’t being withdrawn to pay taxes on higher income.
Read more about Tax Harvesting Here: When tax season is harvest season
Leveraging tax-efficient investments:
Certain investments, such as municipal bonds and exempt-interest dividends, are exempt from federal income tax meaning there is no federal tax liability associated with the income they produce. While these types of investments may yield lower returns, the tax benefits often give them a tax-equivalent yield that is much higher than the current yield. These types of investments are especially helpful for our clients that are in higher tax brackets with large tax burdens. Our tax group and advisor group work together to optimize the return on assets invested while mitigating the tax consequence.
If you’re ready to take advantage of any of these methods or are simply looking for a CPA to help with any of your tax needs, Follow this link to get started.