No one likes paying taxes. Unlike standard tax preparation, tax planning is a year-round exercise. The manner in which you invest your assets, whether to utilize traditional vs. Roth retirement accounts, and how you time distributions from
retirement accounts, all will affect the amount of taxes you will pay over your lifetime. By engaging in deliberate tax planning, we can help optimize these decisions aiming to lower the total share of your resources that would end up in tax coffers. Lowering your cumulative tax liability can help fuel your financial plan to allow for a more secure and bountiful retirement.
Tax planning is a wide-ranging discipline that encompasses every aspect of your income and investments. Here’s a list of tax planning services Ferguson-Johnson Wealth Management provides that could help lower your total tax bill:
Ready to take control of your finances and reduce your tax liabilities? Schedule a meeting with Ferguson-Johnson Wealth Management today to learn about tax-saving strategies for retirement and other financial planning services.Contact Us
It’s important to distinguish between tax planning and tax preparation. The main goal of tax planning is to maximize tax savings both in the current year and over the rest of your life by making tactical and strategic decisions with your income and investments. Tax preparation, on the other hand, involves the completion and filing of your tax returns. Tax preparation services can be obtained by licensed tax preparers and CPAs.
*At Ferguson-Johnson Wealth Management, we are not CPAs and do not perform tax preparation; we solely help with tax planning.
We offer tax planning services tailored to fit your unique needs that help answer these common questions:
Tax planning is different from the tax preparation many of us are familiar with used to file your federal and state tax returns each year. An advisor that performs tax planning can enhance investment strategy and withdrawal sequencing to minimize the impact of taxes on your finances.
These advisors can help you make smart decisions about retirement planning, charitable giving, and when to withdraw from certain accounts to minimize tax liability, and can also guide you with strategies like tax-loss harvesting to save you money and maximize your returns. Additionally, they can help you navigate the ever-changing tax laws so that you don’t miss out on tax reduction opportunities.
A tax plan designed around your needs will help you understand how your taxes project into retirement. From there, we can make decisions about investments and income sources today that may benefit you down the line.
Tax reduction strategies refer to key moves you can make throughout the year to minimize the taxes you owe. A tax planner can help you identify which actions may work best for you and when to implement them, including utilizing year-end opportunities to enhance tax-efficiency.
Strategies may include optimizing contributions to employer-sponsored retirement plans, like a 401(k), and taking advantage of your Health Savings Account (HSA). An advisor can also help you determine which accounts should be drawn from – and when – for financial goals or retirement and how to take best advantage of tax deductible actions like charitable contributions.
Tax-loss harvesting is a tax planning strategy that involves selling securities that have decreased in value to offset capital gains and reduce tax liabilities. There are two types of tax harvesting: tax-loss harvesting and tax-gain harvesting. In tax-loss harvesting, you can use capital losses to offset gains or deduct up to $3,000 from ordinary income. For example, if you sell an investment at a loss of $5,000, you can offset $5,000 of capital gains and potentially deduct $3,000 from your ordinary income.
Tax-gain harvesting, on the other hand, involves strategically realizing long-term capital gains at specific times. For instance, if you are in the 0% tax bracket for long-term capital gains, you can sell an investment with a $10,000 gain without owing any federal taxes. Understanding and utilizing these strategies can help optimize your tax liabilities and potentially enhance your overall investment returns.
It’s important to consult with a tax planner or financial advisor for personalized guidance on tax harvesting and to determine the specific limits and benefits based on your individual circumstances.
Roth conversions can offer tax advantages by moving assets from tax-deferred retirement accounts to tax-free retirement accounts. Converting from a Traditional IRA to a Roth IRA is a taxable event and taxes will need to be paid on the amount converted. However, depending on individual circumstances, it may be advantageous to accelerate income in current years to potentially pay less in taxes later on. Required minimum distributions can often be an unwelcome tax hit for many retirees. By taking proactive steps before RMD-age, it may be possible to alleviate the burden of high taxes on RMDs in the future.
Furthermore, recent changes in tax law have dramatically increased the tax burden on beneficiaries who will inherit IRAs in the future. Roth conversions may allow for more of your wealth to pass on to your loved ones instead of the government.
Roth conversions can be very beneficial by reducing lifetime taxes paid on the growth or retirement assets. However, determining when and how much to convert each year is a critical decision point to make Roth conversions worthwhile.
There are several tactics available for defraying the burden of required minimum distributions. This alongside tactical income management using pre-tax, after-tax, and Roth income, can help significantly reduce lifetime tax erosion.
Ferguson-Johnson Wealth Management is a Registered Investment Advisory firm that has been providing financial planning, investment management, retirement planning, and tax planning services to pre-retirees, retirees, and government employees since 1978, across Maryland, Virginia, and the District of Columbia.
As NAPFA-registered, fee-only financial advisors, we do not sell products or accept commissions or referral fees; instead, we provide personalized investment management services tailored to your needs.