Tax-Smart Wealth Building

Proactive Strategies for Lowering Taxes and Growing Your Financial Future

Asking your accountant at tax time if there’s any way to reduce your tax bill doesn’t always help much. Proper tax planning involves looking at and understanding the tax implications of your financial decisions before you even make them. Whether you are an individual, couple, or a business owner, a good financial plan can provide proactive tax-efficient investing techniques to help lower the tax burden and grow your wealth.

Capstone will guide the way with strategies to consider such as:

Tax-Efficient Asset Allocation:

  • Diversify investments across different asset classes to optimize returns and manage risk.
  • Allocate tax-efficient investments, such as low-turnover index funds or tax-managed funds, to taxable accounts to minimize capital gains distributions.

 Tax-Loss Harvesting:

  • Sell investments that have experienced losses to offset capital gains and reduce taxable income.
  • Be mindful of wash-sale rules to avoid violating IRS regulations when buying back a substantially identical security within 30 days.

Asset Location:

  • Place tax-inefficient assets, such as high-dividend stocks or actively managed funds, in tax-advantaged accounts like IRAs and 401(k)s to defer taxes on income.
  • Hold tax-efficient investments, like tax-managed funds or ETFs, in taxable brokerage accounts to take advantage of lower tax rates on capital gains.

Utilize Tax-Advantaged Accounts:

  • Maximize contributions to tax-advantaged retirement accounts like IRAs, 401(k)s, or Roth IRAs to benefit from tax-deferred or tax-free growth.
  • Leverage Health Savings Accounts (HSAs) for tax-free withdrawals on qualified medical expenses.

Strategic Withdrawal Planning:

  • Plan withdrawals from retirement accounts strategically to minimize tax implications.
  • Consider tax implications of Required Minimum Distributions (RMDs) for retirement accounts after reaching a certain age.

Tax-Efficient Investments:

  • Choose investments that generate tax-efficient returns, such as municipal bonds, which offer tax-free interest income.
  • Invest in tax-efficient index funds or ETFs with low turnover to minimize capital gains distributions.

Gift and Estate Tax Planning:

  • Implement gifting strategies to transfer wealth to heirs while minimizing gift and estate taxes.
  • Consider the implications of the step-up in cost basis for inherited assets.

Tax-Efficient Withdrawal Strategies:

  • Develop a tax-efficient plan for withdrawing funds during retirement to minimize the tax impact.
  • Consider strategies like the Roth IRA conversion ladder to manage tax liability during retirement.

Stay Informed about Tax Law Changes:

  • Keep abreast of changes in tax laws and regulations to adapt strategies accordingly.
  • Adjust investment plans based on potential tax law changes or new opportunities.

Consult with Tax Professionals:

  • Work closely with tax professionals to ensure compliance with tax laws and to identify additional opportunities for tax optimization.

Implementing these strategies requires a thorough understanding of both financial markets and tax regulations. Capstone’s skilled financial advisors can tailor these techniques to an individual’s specific financial situation and goals, taking into account changes in market conditions and tax laws over time.

We welcome your questions and look forward to the opportunity to help you reach your financial goals. 

*This information is not intended to substitute for specific individualized tax advice. We suggest you discuss your specific tax issues with a qualified tax professional.


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