Strategic positioning of income across all tax environments can contribute to financial success. It’s important to recognize the blind spots before incorporating tax strategies into your planning. The first step is understanding how these environments are defined in order to effectively use them.
Tax Strategies Wealth Management

Personal: Covers the income needed for basic human necessities; food, shelter, entertainment. Everything here is an after-tax expense. Without any action, all income defaults to this highly inefficient environment.

 

Corporate: Business owners, with the right knowledge, use this environment to exploit favorable tax treatment for excess income within the corporate structure. Entities include, S-Corp, C-Corp, or the LLC and may be used for general corporate deductions.

 

Tax-Deferred: Saving for retirement is best accomplished in a tax-deferred environment. Examples are pre-tax 401(k) contributions, SEP plan contributions, and defined benefit plans (aka Cash Balance Plan). Depending on the vehicles used, money may be saved before or after tax. Earnings are tax-deferred and withdrawals may, or may not be taxed.

 

Tax-Advantaged: For many tax-payers, additional advantages can be found using things like home mortgage interest, charitable contributions, and residential property taxes, particularly when these exceed personal exemptions.

 

Tax-Free: This environment is often missed, yet it provides several options for additional tax savings. Depending on the individuals situation, things such as municipal investments, 529 plans, Health Savings Accounts, and Roth IRAs can provide long-term tax mitigation. This area of tax planning is especially attractive when income is low.

“Taxes can take a large bite out of your networth over time. Because they are so complicated, comprehensive planning is more important than ever”. Let’s talk!