Tax Planning Can Save You a Bundle

It may be true that nothing is certain except death and taxes, but at least one of those predicaments can be mitigated. Proper tax planning may reduce investment taxes as much as 40%, a savings that could open the door to financial independence. Unfortunately, that crucial aspect of overall wealth management is often overlooked, especially when it comes to retirement and investment income.

But why is a wealth management firm talking about taxes? Because a comprehensive financial plan should include tax planning, and because we can help you with that. We’re one of the few firms in Texas that is both a Registered Investment Advisor (RIA) and has Certified Public Accountants (CPAs) on staff to help clients with tax planning issues.. We’ve been specializing in tax planning since 1967, and have a dedicated team of CPAs that work alongside our wealth advisors to make sure you are not only meeting your investment goals, but are doing it in a tax-efficient way.

We use a myriad of tax planning tools and techniques, including:

  • Roth Conversions – By moving assets from a Traditional IRA to a Roth IRA, your investments continue to grow tax-free and you can take qualified distributions tax-free as well, while bypassing the Required Minimum Distributions (RMDs) rules that impact Traditional IRAs. Reducing or even eliminating RMDs can lower Medicare Premiums and reduce tax liability on Social Security.
  • Tax Loss Harvesting – This strategy involves selling securities to generate capital losses that offset any capital gain income. It can reduce your taxes and allow your portfolio to grow faster since you’re not withdrawing money to pay taxes. Tax loss harvesting can be especially helpful if you have an asset that made large gains in the past year (Bitcoin, anyone?), but it is more complicated than it sounds. You’ll need to weigh short term vs. long term capital gains tax, and consider the worth (and the potential future) of all your assets in order to make the most profitable decision.
  • Tax-Exempt Investments – Certain investments—such as municipal bonds and exempt-interest dividends—accrue no federal tax liability. While they may yield lower returns, the tax benefits often give them a tax-equivalent yield that is much higher than the current yield, and our tax and advisor groups coordinate efforts to optimize returns on investments while mitigating tax consequences. High net worth individuals (HNWIs) with large tax burdens can especially benefit from these types of investments.

Watch Whitney Hare, CPA, Senior Tax Manager, explain 3 ways that our tax team can reduce your tax burden.


Roth conversions are available to many investors, including those with Self-Employment Plan (SEP) IRAs, but can be especially helpful to high net worth individuals, when done correctly. As of March 11th, 2021, people with modified gross incomes (MAGI) of over $140,000 (single) or $208,000 (married and filing jointly) cannot contribute directly to a Roth, but can fund a traditional IRA and then convert it to a Roth IRA, a strategy known as a “Back Door Roth.”

But like tax harvesting, back door Roths and Roth conversions aren’t as straightforward as they seem. You’ll need to consider your tax bracket; whether you should spread out your conversion over several years to mitigate taxes; whether your contributions were deductible or nondeductible; your ratio of pre-tax to after-tax assets for all IRA accounts, and which funds/accounts you’ll use to pay your taxes.

Sound like a lot to analyze? It is, plus your tax mitigation plan should change yearly depending on taxes, investment rules, and your portfolio. Our best advice? Leave tax planning to the professionals. Better yet, leave it to professionals who can work with your advisor to mitigate your tax burden while making the most of your investments. That’s us, Smith Anglin. Contact us today.

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