HowtheTaxCodeAffectsPlanningforIndividualTaxpaye.pptVIP

How the Tax Code Affects Planning for Individual Taxpayers Introduction Balasa Dinverno Foltz LLC started business in 1986 Financial Management firm for individuals, business owners, and pension plans 20 employees: 8 Certified Public Accountants, 2 Attorneys, 2 MBAs, and 8 Certified Financial Planners Approximately $830 Million in assets under management How Do We Keep up With Tax Law Changes? Constant amount of reading and research Specialists in our firm follow tax rules – it is too difficult for generalists to maintain a tax knowledge base We purchase specialized tax research and software 2 of every 3 professionals in our firm are CPAs as a result of our desire to be experts at how income taxes affect our clients The Tax Code Makes Achieving a Simple Objective a Difficult Task Our Objective Is Simple → Maximize after-tax dollars Unfortunately, the complexity of the tax code makes our job very difficult Because of the complexity, we must address numerous issues before we advise clients on the best investment alternatives. These issues include the following- Family tax filing status (and number of exemptions) Amount and sources of income Nature and amount of current financial assets Investments in taxable accounts vs. tax deferred accounts Real Estate Mortgage debt Home equity loans Rental property Additional Planning Considerations Asset Placement – The right investments in the right accounts to minimize the effect of income taxes Can we maximize tax-deferred growth by using 401(k) plans, IRAs, Roth IRAs, profit sharing plans, age-weighted plans or defined benefit plans? Place capital gain assets in taxable accounts and high-income assets in tax-deferred accounts. Tax Loss Harvesting – Utilization of losses associated with investments that have not performed well Match losses with gains on investments that have performed well Differing Tax Treatment for Investment Alternatives Navigating Complexity Because of differing tax rates, tax treatment and favo