5 Tax Saving Strategies


Between social distancing, business interruption, market corrections, and government stimulus (the CARES ACT), a lot has changed over the past 30 days. As a result, the tax planning strategies and options available to you have changed as well. Working closely with a financial planner with tax expertise can potentially save you significant money during these challenging times.

Here Are Your 5 Strategies

1. Consider a ROTH IRA conversion strategy. Market corrections may be a particularly opportune time for tax optimization by utilizing a ROTH IRA conversion. When markets recover after converting funds from an IRA to a ROTH IRA, your market gains are then tax-free gains as opposed to being subject to ordinary income tax rates. Our team is available to discuss the relevancy of a ROTH IRA conversion and how it may work for you.

2. Required Minimum Distributions are not required in 2020. For IRA account owners over the age of 70 1/2, the CARES Act is permitting a one-year suspension of your annual required minimum distribution. This is a key opportunity for tax planning and tax optimization in 2020. Our team will guide you through specific options to formulate a customized tax optimization strategy.

3. Charitable contributions. The CARES Act includes a provision to allow a $300 partial above-the-line charitable contribution for tax filers that take the standard deduction. Additionally, it expands the limit on charitable contributions for those that itemize their deductions. Our team will help give you clarity on these new changes.

4. Ten percent early withdrawal penalty on retirement account distributions is waived. Taxpayers needing to withdraw funds from their retirement account as a result of a coronavirus-related incident can avoid the 10% early withdrawal penalty for distributions up to $100,000. In addition, the time frame for paying the associated income tax on the distribution is extended to three years with the option to re-contribute the funds. Our team will help determine whether this is a beneficial opportunity for you.

5. Tax Loss Harvesting. For investors with investment holdings in taxable accounts, the recent global decline in equity investment holdings has likely created an unrealized loss with certain investment holdings. Our team will educate you on the most efficient way of reducing your tax liability, while still being positioned to benefit from a subsequent market rebound.