Tax Strategies

The strategic placement of different investment types across taxable and tax-advantaged accounts to minimize overall tax burden. Tax-inefficient investments (bonds, REITs, actively managed funds generating ordinary income or short-term capital gains) should be held in tax-advantaged accounts (Traditional IRA, 401(k), Roth IRA). Tax-efficient investments (stocks held long-term, index funds, municipal bonds) should be held in taxable brokerage accounts where qualified dividends and long-term capital gains receive preferential tax treatment.

Example: A client has $500,000 in a taxable brokerage account and $500,000 in a Traditional IRA. Optimal asse...

Tax-advantaged methods for philanthropic giving that maximize charitable impact while minimizing tax liability. Common strategies include donating appreciated securities (avoiding capital gains tax on appreciation), donor-advised funds (immediate tax deduction with flexible timing), charitable remainder trusts (income stream with future donation), and qualified charitable distributions from IRAs. Donating appreciated stock held over one year provides both a fair market value deduction and eliminates capital gains tax on the appreciation.

Example: A client holds stock purchased for $10,000 that is now worth $50,000 (held for 3 years). If they don...

Tax rule preventing income shifting by taxing a child's unearned income above $2,700 at the parent's marginal tax rate instead of the child's lower rate. Applies through age 18 (or through age 23 if a full-time student). Only affects unearned income such as dividends, interest, and capital gains from custodial accounts (UGMA/UTMA), not earned income from employment.

Example: A 16-year-old has $8,000 in dividend income from a UGMA account and $3,000 in wages from a part-time...

The process of transferring funds from a Traditional IRA, SEP IRA, SIMPLE IRA, or employer-sponsored retirement plan (401(k), 403(b)) to a Roth IRA, paying ordinary income tax on the converted pre-tax amount in the year of conversion. Since 2010, there are no income limits for conversions, making this strategy available to all taxpayers regardless of income level. Each conversion is subject to a separate 5-year holding period before converted amounts can be withdrawn penalty-free (even if over age 59½). Conversions are irrevocable and cannot be recharacterized.

Example: A 55-year-old executive with $500,000 in a Traditional IRA expects to retire in a lower tax bracket....

Tax rule that resets cost basis of inherited assets to fair market value at date of death, eliminating capital gains tax on appreciation during decedent's lifetime. Heirs only pay tax on appreciation after inheritance. Does NOT apply to retirement accounts (IRAs, 401(k)s) which pass with ordinary income tax due. Major estate planning benefit for highly appreciated assets.

Example: A mother purchased stock in 1980 for $10,000 that is now worth $500,000 at her death. Her son inheri...

A tax strategy of selling securities at a loss to offset capital gains and reduce tax liability. Realized losses can offset capital gains dollar-for-dollar, with up to $3,000 of excess losses deductible against ordinary income annually. Subject to the wash sale rule, which prohibits repurchasing substantially identical securities within 30 days before or after the sale.

Example: An investor holds Stock A with a $10,000 unrealized loss and Stock B with a $15,000 unrealized gain....

Investment strategies designed to minimize tax drag on portfolio returns through asset location, tax-loss harvesting, holding period management, and low-turnover investing. Core approaches include placing tax-inefficient assets (bonds, REITs) in tax-advantaged accounts and tax-efficient assets (index funds, growth stocks) in taxable accounts, utilizing long-term capital gains treatment, and avoiding unnecessary portfolio turnover. Effective implementation can add 0.50% to 2.00% annually to after-tax returns.

Example: An adviser recommends a client place high-yield bonds (generating ordinary income taxed up to 37%) i...