Tax Reduction Planning
A key component of wealth creation and preservation is minimizing taxes. However, many clients have two financial professionals:
- a financial advisor who provides tax strategies but is not well versed in the tax code; and/or
- an accountant or CPA who understands taxes, but simply takes your information and puts it into the return and files it.
At Opus Financial Solutions, while we will always try to work closely with our clients’ CPAs, we have found that there is often a need for a more streamlined, integrated tax solution. As such, we offer a consolidated solution that integrates financial planning, tax planning, and the ultimate filing of the tax return.
Our Tax Reduction Approach
First and foremost, we start with our foundational principle that taxes matter to our clients' future wealth and grow in importance as time passes. The tax drag that results from a tax-inefficient approach can compound over many years and significantly impact a client's ability to meet their goals.
In order to determine whether the after-tax benefit of a strategy improves outcomes or not, we frequently will project out taxes under varying scenarios. An easy example may be determining whether converting to a ROTH IRA is beneficial in the long term, and where the breakeven point is - beyond which it is no longer efficient. Showing actual projections allows clients to evaluate decisions beyond the conceptual by being more informed on actual impact.
Tax Efficient Accumulation and Distributions
There are two times when taxes really matter - when you are investing money, and when you are withdrawing money. When we work with clients in the accumulation phase of life, we look at techniques such as ROTH IRAs, tax-loss harvesting, making excess after-tax 401k contributions, donor advised funds, 529 accounts, real estate IRAs, and other deferral opportunities like annuities, where appropriate. When we work with clients who are taking distributions from their portfolios, we design distribution strategies that minimizes taxes.
Tax Efficient Portfolio Management
When managing investment portfolios, we give consideration to the tax efficiency of underlying investments, and whether we can improve overall portfolio tax efficiency by placing less tax efficient investments in deferred accounts and more tax efficient investments in taxable accounts (asset location). We continually review whether there's an opportunity to offset any gains generated by selling investments at a loss (tax loss harvesting), and giving consideration to taxable gains or losses which would be generated as a result of a rebalancing.
In addition to our Tax Reduction Approach outlined above, as an authorized IRS e-file provider we are also able to prepare and file personal returns for qualified clients.