Taxes and More

Items to Consider Prior to April 15th

The tax man is almost here, however, there is still time to make prudent tax decisions before April 15th.  

We operate in a world of caveats and asterisks* and this is no exception. We do not hold ourselves out as tax professionals, and we recommend consulting with your tax expert based upon your circumstances. In our opinion, tax advice and investment advice should come from separate sources.   

With this said, one of the major duties within our responsibilities as your financial advisory team is to appropriately recommend what type of accounts you place your investment dollars into, in order to optimize long-term investment outcomes. Below is a list of tax considerations we recommend you discuss with us (if they pertain to you) that can still easily be taken advantage of before the tax clock strikes midnight.  

Contribute the maximum you can to qualified retirement accounts – Depending upon household earnings; you can contribute directly to either a traditional IRA or a Roth IRA. For those under 50, the maximum allowable contribution is $6,000. For those over 50, the allowable contribution increases to $7,000. Like a fine wine, the older vintages deservedly price higher.  

Explore a back-door Roth conversion from a traditional IRA – While there are no income limitations on contributing to a traditional IRA, only those earning below a certain threshold – $203,000 for a household filing Jointly – can contribute to a Roth IRA. Earnings from a Roth IRA have additional benefits of being permanently tax-free – unlike the tax-deferred nature of traditional IRA’s. For those earning above the threshold to contribute directly to a Roth IRA the IRS has allowed a “back-door” investment opportunity to take advantage of this opportunity. Like anything that sounds too good to be true, it usually is, and this is no exception as there are unique hurdles that need to be overcome to make this option a reality with your particular circumstances. However, this conversation is at least worth broaching with your investment and tax professionals.  

Self-Employed Workers Can Still Set up a SEP IRA – You may contribute as much as 25% of compensation per participant, up to $280,000 for 2019. The maximum annual contribution your employer can make on your behalf is $56,000 for 2019.  

Don’t forget to use remaining dollars associated with an employer Flex Spending Account/Health Savings Account – flex spending plans can be a tax-efficient way to pay for medical and child-care related expenses. Often times they must be used before tax filing deadlines or they are lost. On a similar note, if you participate in a Health Savings Account (HSA) you can make additional contributions before taxes are due for 2019.

Gear up for qualified charitable contributions – For those over 70.5 years old who are forced to take required minimum distributions (RMD’s) from their IRA accounts, this is often times the most tax-efficient form of charitable giving. If you were born in 1949 or earlier, you can contribute directly to a charity of your choice and reduce tax consequences at the same time. It’s too late for this one to affect your 2019 taxes, but should be taken into consideration pertaining to all charitable gifting moving forward.

Again, the above list is not all-encompassing; however, these are important discussions to have and we would not be doing our job if we were not encouraging you to put the puzzle pieces of your financial life into the correct positions.  People like to talk about flashy headlines like those currently gripping markets but prudent placement of assets based upon tax efficiency has a much more material effect on your particular circumstances over the long-term. We are honored with the trust you have placed in our team. Please contact us at info@oscfp.com if we can do anything to assist you in your planning.