Tax planning isn’t just something to think about in April—it’s a year-round strategy that can help you keep more of your hard-earned money. The right tax moves can reduce what you owe, maximize your savings, and ensure your financial plan is as efficient as possible. Whether you’re in your peak earning years, nearing retirement, or already enjoying it, here are some smart tax strategies to consider.
- Optimize Your Investment Portfolio for Tax Efficiency
Not all investments are taxed the same way, and where you hold your investments matters. Consider these key strategies:
✅ Tax-Efficient Asset Placement: Some investments generate taxable income, while others are more tax-friendly. Holding tax-efficient investments (like index funds) in taxable accounts and tax-heavy assets (like bonds) in tax-advantaged accounts can help you reduce your tax burden.
✅ Harvesting Capital Gains & Losses: Selling investments strategically can offset gains with losses, reducing your taxable income. This technique, called tax-loss harvesting, is a smart way to rebalance your portfolio while keeping taxes in check.
✅ Consider Municipal Bonds: If you’re looking for tax-free income, municipal bonds can provide interest earnings that are exempt from federal (and sometimes state) taxes.
- Make Roth Conversions in Lower-Income Years
A Roth conversion allows you to move funds from a traditional IRA (which is taxed when withdrawn) into a Roth IRA (which grows tax-free). While you will pay taxes on the conversion now, this move can:
✔ Reduce future required minimum distributions (RMDs) that could push you into a higher tax bracket.
✔ Provide tax-free withdrawals in retirement, giving you more flexibility in managing your income.
✔ Be especially valuable in years when your income is lower, allowing you to convert at a lower tax rate.
If you’re approaching retirement or in a transition year with lower income, a Roth conversion could be a powerful tool to lower your long-term tax liability.
- Take Advantage of Charitable Bunching to Maximize Deductions
If you give to charity, consider using charitable bunching to maximize your deductions. With standard deductions now higher than in previous years, many taxpayers don’t itemize every year. Charitable bunching means making multiple years’ worth of donations in one year to exceed the standard deduction threshold and maximize tax benefits.
Other tax-smart charitable giving strategies include:
✔ Donor-Advised Funds (DAFs): Contribute now, claim the deduction, and distribute the funds to charities over time.
✔ Qualified Charitable Distributions (QCDs): If you’re 70½ or older, you can donate directly from your IRA to a charity, satisfying RMDs while avoiding taxable income.
- Be Strategic About Retirement Withdrawals
When it’s time to start drawing from your retirement accounts, a thoughtful withdrawal strategy can help minimize your tax bill:
✔ Withdraw from taxable accounts first to allow tax-advantaged accounts more time to grow.
✔ Take advantage of lower tax brackets—spreading withdrawals over multiple years can prevent large tax spikes.
✔ Delay Social Security if possible to allow for higher benefits and reduce taxable income early in retirement.
Careful planning ensures you keep more of your savings working for you.
- Maximize Tax-Advantaged Savings Opportunities
Don’t leave money on the table—take full advantage of tax-advantaged accounts like:
🔹 401(k) & IRA Contributions: Max out contributions to reduce taxable income now and grow your savings tax-deferred.
🔹 Health Savings Accounts (HSAs): Triple-tax-advantaged and great for medical expenses now and in retirement.
🔹 529 Plans for Education Savings: Tax-free growth when used for qualified education expenses.
Start Making Smart Tax Moves Today!
Smart tax moves don’t just happen in April—they require planning all year long. Whether it’s optimizing investments, making strategic withdrawals, or leveraging tax-advantaged accounts, the right approach can reduce your tax burden and keep more money in your pocket.
At PrairieView Wealth Partners, we specialize in tax-efficient financial planning that aligns with your goals. Want to make sure your tax strategy is working for you? Let’s start the conversation today!
