A multiyear portfolio tax strategy

You may have more control over the amount and timing of taxes than you realize — especially when it comes to your investments.

Looking ahead, several important changes that were implemented through the 2017 Tax Cuts and Jobs Act (TCJA) are scheduled to expire at the end of 2025. While this may seem far away, now is a good time to create a multiyear tax strategy that will allow you to benefit as much as possible from the TCJA’s provisions while, at the same time, prepare for their expirations.

Key idea:  As you explore this longer-term plan, ask your financial and/or tax professional for some real-world scenarios, specific to you, that show you the financial impact of current provisions today and the expiration of those provisions down the road.

1. Tax-efficient investing to-dos

Regardless of the tax environment, taking the steps below will lay the groundwork for a tax-efficient investment strategy. Ideas to consider:

• Provide your financial professional with your latest federal and state tax information
• Introduce your financial and tax professionals
• Contribute the maximum to tax-deferred accounts, such as your employer’s retirement plan and your IRA
• Discuss a multiyear tax strategy with your financial professional

2. Review the tax landscape

As the scheduled expiration of the TCJA tax provisions nears, it may be helpful to think back to your pre-TCJA tax returns. With your advisor’s help, you’ll want to consider:

• If your previous tax situation was better, worse, or just different from it is today
• What has changed since 2018 that may have tax implications for you down the road
• If you were previously subject to the alternative minimum tax (AMT)
• If you’ll be in the same tax bracket that you were in prior to 2018

3. Minimize the impact of taxes on investment returns

The value of your investments is changing, and the varying levels of capital gains and losses in your portfolio creates opportunities to enhance the amount of your after-tax returns. Additionally, changes to your income level could change your tax bracket; or, if you’ve moved, you could be subject to different state and local taxes. Perhaps you received equity options from your employer that you want to exercise; the expiring TCJA provisions are another important variable in this equation. Your advisor can help you sort through these moving parts and answer questions such as:

• Is now a good time to move assets to a different type of account; e.g., converting a traditional IRA to a Roth?
• What can you do from an investment perspective to minimize the impact of AMT?
• Should trusts be part of your estate planning? If so, what type?
• How can you be more strategic about charitable giving?
• Should you take advantage of the higher standard deduction for the next few tax years and group itemized deductions into later years?

Plenty can happen in the coming years from a tax perspective. Changes to the tax code could even happen prior to 2025. Together with your tax professionals, your advisor can help you factor taxes into your investment strategy and develop a tax-efficient investment approach that considers the current tax environment and helps you prepare for any future changes down the road.

For more information, please consult with your financial professional.