Tax Strategies

Asset allocation is an investment strategy that aims to balance risk and reward through allocating assets in an investment portfolio in ways that align with an individual’s goals and risk tolerance. Often, diversifying assets in the portfolio is a strategy included in the asset allocation model. Asset allocation is truly dependent on the individual, their age, and their financial goals.

Charitable gifting is one way to offset taxes and practice philanthropy at the same time. One way to maximize deductions is to donate assets like stocks and mutual funds directly to the charity rather than selling them and donating the cash. If you have owned the securities for longer than a year, you can generally claim a tax deduction in the amount of the entire fair market value, and both you and the charity do not have to pay taxes on the gain. Charitable gifting can combine cash and long-term appreciated securities to potentially create a larger deduction than contributing securities by themselves. Another charitable gifting strategy is to consider a donor-advised fund or DAF for charitable gifting.

Whether made up of cash equivalents, stock, or other appreciated assets, a donor-advised fund is one way that is both efficient and simple. Donating to a donor-advised fund is a quick way to ensure you’re eligible for a tax deduction. It is much simpler than dealing with writing checks or transferring stock to multiple charities. You simply make a single donation to a donor-advised fund dedicated to a specific charitable account used for supporting charities that you are passionate about

Usually, a qualified charitable distribution is considered a taxable distribution from an individual retirement account (exceptions include a SEP or SIMPLE IRA) owned by an individual who is 70 ½ or older. It must be paid directly to a qualified charity from the individual retirement account.

Tax bracket management is one way to boost after-tax returns. Whatever your investment objective is, growth or capital preservation, maximizing your after-tax return should be a primary component of your overall goal. A way to do so is to implement a strategy called tax bracket management. This strategy is used to reduce taxes on high-income years by paying taxes in your lower income years if you expect you will receive higher income in the future. With tax bracket management, you won’t be eliminating taxes on your income but instead deferring those taxes to a later time. It is essential to understand when and how the deferred income will be taxed. Most importantly, remember that when you are implementing any tax strategies, make sure that you are working with a trusted advisor to maximize effectiveness and avoid making costly mistakes. Our tax strategies begin with analyzing your finance, assets, and liabilities to maximize tax breaks and minimize liabilities. Get in touch today!