Tax Planning for Key Life Decisions

Making smart tax choices for life’s biggest changes significantly impacts your net worth and available wealth to provide for your family. At Accountability Services, we help clients navigate milestones proactively, to make the right tax planning decisions for achieving long-term financial goals.

Are you taking advantage of all available tax efficiency strategies?

Saving for college

Whether you’re planning to fund college for your children or have eyes on returning to school to retrain or advance your career, a 529 College Savings Plan offers tax-free growth on your investment when used for qualified education expenses.

  • Contributions are made with after-tax money (nothing to worry about come tax time)
  • Maintain control over the funds
  • Unused funds can be transferred or cashed-in (tax-free up to the “basis”)

Pro tip: A 529 can be opened for a grandchild, niece/nephew or an unborn/future child by using your social security number and listing the child as the beneficiary.

Tax-free growth for qualified medical expenses

Did you know Health Savings Accounts (HSAs) are available to everyone, regardless of income?

If a high-deductible insurance plan works for you, an HSA can both lower your taxable income and provide additional tax-advantaged investment for your portfolio.

  • Contributions are made pre-tax, making them 100% deductible
  • In 2024, HSA contribution limits increase to $4,150 for individuals and $8,300 for families, with an additional $1,000 catch-up available for those over 55
  • Choose how funds are invested or spent
  • Unused funds roll over year-to-year
  • Eligible withdrawals are tax-free

Leverage both pre- and post-tax retirement savings accounts

Understanding the pros and cons of pre- and post-tax retirement savings accounts can help you build the right portfolio for maximizing returns and minimizing taxes (both during your working years and retirement.)

Pre-tax accounts lower your taxable income today and are tax-deferred until funds are withdrawn:

  • Traditional IRA
  • 401(k)
  • 403(b)
  • SEP 401(k) or Solo 401(k)

Post-tax accounts allow 100% tax-free earnings. Do note that these accounts may be unavailable or offer a lower max contribution limit at higher income levels:

  • Designated Roth 401(k)
  • Roth IRA

Estate planning is for everyone

Whether you are high net worth or plan to leave a smaller estate, proper planning can ensure your financial concerns, goals and wishes are fulfilled after death.

While executing a Will is a fantastic first step towards providing for your loved ones, avoiding probate and reducing taxes, working with your accountant and attorney to establish a long-term plan is your best strategy for maximizing the transfer of wealth to your heirs.

  • Make proper use of joint ownership of property
  • Ensure sufficient liquid assets in your estate to cover taxes
  • Consider potential tax implications of retiring in another state or country
  • Understand which accounts are taxable to beneficiaries
  • Explore options for setting up trusts (real estate or bypass, education, medical)
  • Utilize your annual gift tax exclusion to transfer wealth tax-free while living

Transition or succession planning

Putting off business exit planning until the last minute is unfortunately very common. The emotional aspects of giving up one’s identity or anxiety over the unknowns of post-ownership life can lead to procrastination.

But do you really want to die at your desk? Or potentially minimize the value of your life’s work?

The absolute latest time frame for thinking about transition or succession planning is 5 to 10 years out from the earliest time you would consider exiting your business.

  • Outline both personal and financial objectives
  • Identify and implement strategies for maximizing return
  • Minimize risk and keep your sanity

Daring to ponder, “What’s next?”, long before you’re ready to make the leap, allows you to create a strategic lifestyle game plan for making all your post-ownership dreams come true.

Tax relief for caregivers

If you care for a chronically ill individual, the following care-related expenses may be tax deductible:

  • Transportation to medical appointments
  • Changes to a home or car for medical reasons
  • Long term care insurance premiums
  • Privately hired in-home health-care premiums
  • Prescription drugs

Note that to qualify as chronically ill, the person you care for must need help with a minimum of two daily living activities or require substantial supervision to protect health and safety due to severe cognitive impairment.

Need help planning for life’s biggest milestones?

Our team believes taxes should be the result of strategic planning, and never a surprise. For all your key life decisions, trust Accountability Services to help you make intelligent choices for the best tax outcomes.

Start your journey to tax-efficiency by requesting a free consultation with our team here: online contact form.

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