Meaningful Conversations about Money

Making Your Tax Return Great Again!

By Steve Siders & Robert Fezza

Once tax season is here, it may be too late to implement some very helpful tax saving strategies. At Odyssey, we keep our client’s “pay-triotic duty” top of mind by engaging in tax-wise investing and financial advice year-round. Here are a few investment related techniques to lower your tax bill in the future.

Have a plan… and follow it. Begin with clearly defined goals and a documented plan, then use the best after-tax investment strategy you can find to meet your goals. Rely on your professional advisers to keep you well positioned. Ignore the inevitable distractions along the way.
Avoid excessive trading. Bottom line, the more trading you do in your taxable accounts, the greater the likelihood you are to be taxed. If you utilize a strategy that involves fewer trades, the better off you’re likely to be.
Avoid actively traded funds in favor of indexing or passive investing. Just as you should minimize your own hyperactive trading, you should invest in funds where the managers avoid trying to “beat” the market by actively picking individual stocks or timing the market. Instead, look for mangers who seek to build lasting value by patiently participating in the long-term growth expected from specific investment types.
Not every fund is created equally.  Even if two funds share identical investment objectives, one may be considerably better than the other at tax-efficiently managing its holdings. Some fund families offer versions of their funds called tax-managed funds that are deliberately structured to maximize after-tax returns.
Make good use of tax-sheltered accounts. The more assets you can hold in tax-sheltered or tax-free accounts (e.g., IRAs, Roth IRAs, 401(k)s, 529 college saving plans and health savings accounts), the more opportunities you have to avoid or at least postpone some of the inherent tax ramifications that exist in building wealth.
Other valuable tax planning suggestions. Some of these techniques include: the ability to harvest capital losses against capital gains, donate appreciated shares to charity, coordinate step-up in basis, and take foreign tax credits. Note that these opportunities are only available for positions held in taxable accounts.
Now is the time to take action to improve your tax situation for next year and beyond. Are key members of your financial team acting in isolation or in concert with one another—your tax professional, investment advisor, estate planning attorney, insurance agent? Who serves as the quarterback of your advisory team? Even if each seeks the best tax-related decision within their specialized area, there may be unintentional consequences when strategies are not coordinated jointly.
Life’s a journey—navigate it wisely!

Robert Fezza and Steve Siders.

Robert Fezza, CFP® and Steve Siders, CFP® own Odyssey Personal Financial Advisors, 500 Sun Valley Drive, Suite A-6, Roswell, GA. Their firm specializes in working with people who are serious about making progress towards their financial goals. Odyssey manages portfolios greater than $250,000. 770-992-4444, www.odysseypfa.com. Securities offered through Cetera Financial Specialists LLC, member FINRA/SIPC.