High Income? Time for a Team

A Roth conversion, charitable gift or investment sale should fit the rest of your retirement plan. Work directly with Todd Smurl, CFA, to connect investment decisions with your broader financial priorities, coordinating with your tax preparer and estate attorney when needed.

Build Your Team of Professionals

• I hold the CFA designation (Chartered Financial Analyst) and specialize in portfolio management and financial planning.
• Your CPA or tax preparer files the return and knows how the rules apply to it.
• Your estate attorney drafts the documents that carry out the plan.

I do not prepare tax returns or draft legal documents. We identify personal planning questions, agree on the scope of our work and coordinate relevant next steps with your tax preparer and estate attorney. Each professional is responsible for their own advice and work.

Tax-Focused Investment Strategies

Once you have the right team of professionals who understand your financial situation, there are some strategies you may consider using this year.

Backdoor Roth IRA

Income limits can restrict direct Roth IRA contributions. A backdoor Roth strategy generally involves an eligible nondeductible traditional IRA contribution followed by a Roth conversion; it is not a promise of a deductible contribution followed by a tax-free conversion.

Nondeductible contributions create basis and cannot also be deducted. Untaxed amounts converted to a Roth IRA are generally taxable. Existing traditional, SEP and SIMPLE IRA balances can affect the calculation, so you cannot assume that only gains since the latest contribution will be taxed.

Before acting, review contribution eligibility, IRA basis, existing balances, conversion timing and Form 8606 reporting with your tax preparer. Todd can help consider how a conversion fits your retirement and investment priorities, but does not prepare the tax return. See the IRS IRA FAQs and Form 8606 instructions.

Tax-Focused Gifting

Smart moves can help you manage your taxable income and taxable estate. For instance, if you're making a charitable gift, consider giving appreciated securities you have held for more than one year.

The treatment depends on the asset, recipient, holding period, deduction limits and your tax circumstances. Review those details and the receiving organization's requirements with your tax preparer before transferring assets.

This discussion of tax-focused giving is for informational purposes only and is not a replacement for real-life advice, so make sure to consult your financial, tax, and legal professionals before modifying your gifting strategy.

Gifts to family members raise different questions from charitable gifts. Discuss gift reporting, applicable exclusions and estate implications with your tax preparer and estate attorney rather than assuming one rule applies to both.

Tax-Loss Harvesting

Tax-loss harvesting means realizing capital losses (selling securities worth less than you paid for them) to help offset capital gains you have recognized. It doesn't get rid of your losses, but it can be a way to manage your tax liability.

Keep in mind that the return and principal value of securities fluctuate with market conditions, and past performance is no guarantee of future returns.

Net capital losses may reduce ordinary income, generally up to $3,000 a year ($1,500 if married filing separately), subject to the applicable rules. Unused losses may carry forward. A deduction reduces taxable income, not the tax bill dollar for dollar. See IRS Publication 550.

By taking losses this year and carrying over the excess losses into the next, you can potentially offset some (or maybe all) of your capital gains next year. Before moving ahead with a trade, it’s important to understand the role each investment plays in your portfolio.

Active tax management is optional for enrolled taxable assets. Altruist, our custodian, charges up to 0.10% per year on those assets, separate from our advisory fee; Integrity Financial Planning receives no part of it. Review the approach and complete fees.

For clients with assets under management under $500,000, the Advisor reserves the right to charge an hourly fee for financial planning.

Wash-sale rules can disallow losses when substantially identical securities are purchased within 30 days before or after a loss sale, including certain purchases in other accounts or by a spouse. Coordinate with your tax preparer and disclose relevant trading outside the managed account.

If you are approaching retirement or reviewing your current adviser relationship, schedule a free, no-obligation introductory meeting with Todd to discuss your priorities and whether our approach fits. These strategies do not guarantee tax savings or investment results.

This content is developed from sources believed to be providing accurate information, and provided by Integrity Financial Planning, LLC and Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.