Tax Prep with a Financial Advisor: 5 Ways They Can Help

A Strong Financial Plan Includes a Strong Tax Strategy

It’s important to consider strategies to help reduce your overall tax burden, especially as tax season is upon us. While you may know the benefits of working with a Certified Public Accountant  (CPA) to assist you, did you know that financial advisors can be helpful with tax strategy, as well? An experienced financial advisor can recommend strategic tax options to help lower your annual tax burden. These conversations with your advisor are most beneficial if you start early and continue to have them throughout the year, that way you’ll be better prepared at tax time. Read on for some general tax prep tips, as well as more on how a financial advisor can serve you in this way.

Tax Prep Tip #1: Determining Ways to Maximize Your Tax Savings Throughout the Year

A financial advisor can recommend a number of financial actions you can implement throughout the year that can result in a lower tax bill. There are investment accounts like traditional IRAs and company-sponsored  401(k)s that allow you to make tax-deferred contributions, for example. These accounts lower your present taxable income, while helping you build retirement savings. If you have a company-sponsored 401(k) with an employer match, be sure to take advantage and contribute to that account because the match is equivalent to free money that helps to build your retirement savings that much faster.

Tax Prep Tip #2: Stay Informed About Your Capital Gains and Losses

If you have investments, including stocks or bonds, you’ll need the information about how much you’ve earned or lost from those investments that year. Determining capital gains and losses can be tricky to navigate on your own. However, your financial advisor will have an accurate record of your portfolio investments that they can provide to your accountant. Be sure to deploy the expertise of both your financial advisor and accountant at tax time to ensure you’re paying the correct amount of capital gains tax.

Tax Prep Tip #3: Utilize Gifting Strategies

Your philanthropy can go a long way toward providing you with both personal and financial benefits. When done strategically, you can receive both the joy that comes with helping the people or causes you care about and valuable tax benefits. It’s smart to talk with your financial advisor about the many ways you can donate your money in ways that will help reduce your tax bill. Gifting strategies go beyond charitable causes; you can transfer your wealth to family members without tax penalties up to a certain amount each year, too. Maximize your charitable giving by talking with your financial advisor about the opportunities available to you.

Tax Prep Tip #4: Prepare Strategies to Lower Your RMD Tax Bill

Required Minimum Distributions (RMDs) from any IRAs or 401(k) accounts you own begin at age 72. These distributions are taxable, and many retirees are unprepared for the increase in their tax bill. To prepare for this inevitability, talk with your financial advisor ahead of time. They can provide you with strategies you can implement to help lower your tax liability when you reach the time to start taking distributions.

Tax Prep Tip #5: Identify the Best Tax-Efficient Strategies for You

A financial advisor can help you to determine the best tax savings strategies to fit your portfolio. While you may not be able to avoid capital gains tax, there are options such as offsetting gains with losses, tax-loss harvesting, and avoiding such things as a ‘phantom tax’. All of these strategies can serve to limit your overall tax liability. Thus, a trusted financial advisor can help you manage and balance a portfolio while guiding you with the best investment strategies to help you when tax time comes.

Can You Benefit from Having a Financial Advisor Assist You with Tax Strategies?

Taxes can be complex – even downright confusing! Tax laws and requirements are ever-changing depending on the economy and any new legislative actions. A trusted financial advisor is educated and informed about the current sphere of the economy and taxes. They can provide guidance throughout the year to help you make the decisions that are best for you, while helping to boost your tax strategy so you can save more of your hard-earned money.


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