Your Tax Savings, Threatened? (How Wealthy Americans Unlock Hidden Uncertainty Tax Opportunities)

It can feel like the floor is about to fall out from under you when thinking about tax law changes. With each news release about what they’re considering, questions swirl through your mind like:

Will I be pushed into a higher tax bracket?

Will there be changes in how much of my estate is excluded from the estate and gift tax?

Will I still be able to convert tax-deferred money into tax-free funds?

Are all the right investments in all the right places?

Like most other taxpaying Americans, you never know which laws will change, when, and how long they’ll stay the same. Right now we’re in a period of tax uncertainty.

In some situations, freezing up and doing nothing is the right thing to do. However, this state of limbo can actually lead to opportunities for tax savings.

You can choose to “flee” or “freeze'' by electing to ignore tax planning. Or, as wealthy Americans typically do, you can run toward potential strategies to help create tax savings instead.

If you choose to seize the possible advantages that are waiting for you, it’s best to do it sooner rather than later. Once you file your taxes, everything’s pretty much locked in.

History has made it clear that changes are often made to tax rates and tax brackets. In the past 20 years, the top marginal tax rate for the wealthiest taxpayers has shifted between 35% and 39.6%.

The income floor of married couples filing jointly who are required to pay that rate has swirled around in that same time frame between $628,301 and $297,350.¹ Some of that difference is due to inflation, but not all of it!

Given that things could change quite a bit for the next tax year, how much value are you prepared to squeeze out of your tax planning this year?

This tax-saving strategy guide is designed especially for high earners — just like you -— to help uncover the opportunities that may be hidden in plain sight. And to help you embrace the uncertainty around taxes so that you can take advantage of potential benefits while others are frozen in place.

You’re probably asking yourself questions like:

• Will I likely be paying more in taxes in the coming years?
• Am I taking advantage of all the tax-saving strategies that I have access to?
• How can I use the current unpredictability around taxes to my benefit?
• Are my investments aligned with my tax plans?
• Am I missing out on any smart financial strategies?

If any of these questions resonate with you, keep reading...

Wring Every Advantage From Current Tax Rates

No one knows when tax brackets will change again, but what we do know is what tax rates and brackets look like for the current tax year. The best strategy (no matter what’s coming) is to make the most of what you’ve got for this year.

Where possible, and given your circumstances, it’s often a great idea to shift money from ordinary income to capital gains tax, since it’s significantly lower than income tax rates for this year.

Key questions you need to ask yourself include:

• Am I “filling up” my tax bracket to wring out as much as I can from it?
• Is there any income I can shift to the lower capital gains tax instead of paying at my marginal tax rate?
• Are there any deductions that I could take that I’m not already considering in my tax plan?
• Do I have a trusted financial professional who can help me with these questions?

Squeeze As Much Benefit From Your Retirement Accounts

You don’t need to be retired to create a plan to transform as much pre-tax money into tax-free as you can. You may be able to convert some Traditional (pre-tax) retirement funds into a Roth account without pushing the limit into a higher tax bracket.

Typically this process takes a few years, so you need to get started developing your strategy as soon as possible.

Depending on your age and where your Traditional retirement funds are located, you may be able to avoid taxation on your Required Minimum Distributions (RMDs).

You’ll contribute to charity directly through a Qualified Charitable Distribution (QCD). Just make sure you follow the rules so that your withdrawal isn’t disqualified!

Key questions you need to ask yourself include:

• If I’m charitably inclined and of age, will the QCD strategy help me avoid incurring income taxes on my RMDs?
• How much availability (if any) do I have to make some Roth conversions so my money grows tax-free?
• Have I consulted with a financial professional to ensure that my retirement accounts are working as hard as they can for me?

Make the Most of Location, Location, Location

It’s not just real estate where location makes a big difference! Depending on your circumstances, you might be able to invest in ways and accounts that help you increase your tax savings. Some investments are better positioned to take advantage of different tax buckets (taxable, tax-deferred, and tax-free) compared to others.

Ensuring that your investments are sitting in the right accounts can help you make your portfolio more tax smart.

Key questions you need to ask yourself include:

• Am I taking full advantage of all the tax buckets that are available to me?
• Are my investments located in the most tax-efficient accounts possible for my specific situation?
• Have I discussed whether my investments are working efficiently with a financial professional?

Exclude Your Way to Tax Savings

In addition to the estate tax exclusion amount at death, there is also an annual gift exclusion while you’re living. These gifts require no gift tax return and do not affect your estate tax exclusion.

You can also use certain kinds of trusts to avoid probate and remove assets from your estate where possible. Leveraging trusts and gifts can be a good way to maintain some control over your assets and reduce the size of your estate, whether the exclusion amount changes or not.

Key questions you need to ask yourself include:

• Will an annual gifting program allow me to satisfy my charitable desires without losing too much control over my money?
• If something were to happen to me this year, would my estate owe taxes?
• Is there any reason the amount I plan to transfer to my heirs could face additional taxes?
• Have I discussed my estate plans with a financial professional?

Adapt to a Flexible Strategy

Knowing that tax laws can change every year, you need a plan that is nimble no matter what the new laws fling at you. The ability to not only uncover today’s hidden opportunities, but also take advantage of tomorrow’s, is a critical strategy that helps give the wealthiest taxpayers the upper hand.

By capturing the opportunities described above and squeezing the most out of uncertainty, you can avoid being left out and paying more in taxes than you need to. As you know, it’s not how much you make but how much you keep that counts!

Key questions you need to ask yourself include:

• Do I have my tax-saving strategy dialed in for this tax year?
• Can the same strategy be used effectively in a new tax regime?
• Have I discussed my plan, and whether or not it’s adaptable for future tax years, with my financial professional?

Seize The Opportunities Hidden In the Tax Code (Before They Disappear)

By facing the uncertainty that currently clouds the tax landscape, you can access strategies that wealthy American taxpayers use to avoid paying more than they need to. There are opportunities you can uncover right now that will help you devise a tax-efficient plan to serve you now and in the future.

Wouldn’t it be satisfying to know that you’ve squeezed out every last drop of tax savings that you possibly could? And that you can easily adapt to whatever’s coming next tax year when the fog of uncertainty finally lifts?

It’s critical to plan for this tax year to ensure that you don’t lose out on a potential opportunity when the tax laws change, as they inevitably do.

Are you capturing all the tax savings possible, from deductions to conversions to changing income treatment from marginal income tax rates to capital gains?

You may have more tax strategies available to you than you’ve previously realized. Unfortunately, some of these could be on the chopping block. Act now or else you could lose out — potentially forever.

Our team of financial professionals know what’s hidden inside the tax code and under the clouds of ambiguity, and our 365 Retirement Plan process is designed to examine your entire financial picture to ensure that you’re not missing out on anything. We have a lot of experience with taxes and investments, so get started on building your personalized 365 Retirement Plan today.

In order to wring out the most of your opportunities this year, you need a team that specializes in tax-efficient investment strategies. We help high-earning taxpayers just like you keep more money for themselves and for their heirs through planning and investing that potentially maximizes the tax-saving benefits available to you.

You’ve already made the wise decision to read through this helpful guide. Your next smart move? 

Contact us to schedule your complimentary 1-on-1 strategy call and get started on your 365 Retirement Plan right now.

Sources:

1 - https://taxfoundation.org/historical-income-tax-rates-brackets/