Avoiding a Big Tax Surprise Video from Savant Wealth Management

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Welcome to today’s Savant Wealth Management webinar. We’re talking about avoiding a big tax surprise today. I’m going to host the time together. My name is Joel Cundick. I’m a financial adviser on Savant’s Vienna, Virginia team. We have offices now in over 20 states.  I cover the you know small section of the east coast but we have off often times offices pretty much close to where you are. So we’d welcome a conversation but we want to make sure when we do this webinar series that we’re providing helpful content to you where you’re at. Make sure that you post questions into the Q&A as you have them.  I’d be happy to answer which however many I can.  but if I don’t get to them today, please know that you can still add them to a survey that will be given to you at the end of today’s presentation and we are going to make sure that somebody gets an answer to you to your question. The goal here today is to give you great suggestions that can assist with your situation. , always good to consult someone, one-on-one because I’m going to talk to a wide audience today, but I hope that we get you some information that will be useful. All right, we’re going to kick things off by talking about , planning versus preparation. Then we’re going to talk about two kinds of ways of saving money on taxes. We got to think above the line and we have to think below the line with one kind of dot dot dot in between.  we’ll review some of the major changes to taxes as a result of secure act 2.0 and we’re going to talk a little bit at the end about business succession because there’s few places in taxes that there is more opportunity for tax savings or major tax bills than in selling a business. So there’s some things to keep in mind there. And like I said, we’ll have some time at the end for Q&A. All right. So, when we think about planning versus preparing, right now it’s the middle of tax season. You’re all gathering documents. Many of you have already gathered them together. Some of you thought about maybe gathering them together in two or three weeks. We all kind of approach this process differently. However, I would say that this tends to be the time of year that people think about taxes and it’s probably not the ideal time to be doing tax planning. The reason for this is every time you reach out to a CPA, they’re focused on getting a tax   prep done for a client. If you’re just thinking about it yourself, you’re focusing on tax prep or when the refund’s going to arrive or when the bill’s going to be due. And what we’d really like to see is that April 15th be the beginning of tax planning for the future as opposed to the finish line for tax preparation for the previous year. There’s very little amount that can be done after a tax year to adjust the taxes for that year. But there’s a lot that can be done within a tax year to make some adjustments, modifications in certain individual situations that will be greater and certainly smaller. But let’s see if we can give you some ideas. So April 15th is the start point. Focus on 2027 tax planning after completing the return that you’re doing for this year.  let’s keep in mind what we’re looking for. We’re watching for unusual events in our lives. If your situation is just the W2 that you have every year and the 1099 that comes out from your investments, maybe your situation doesn’t need to be looked at as closely each year. There are always things we can consider, but what we really want to watch for is years where something big happens. What am I talking about? selling a home, selling a business, receiving an inheritance, receiving an unusually large bonus, receiving stock compensation for the first time that we have not received in the past, receiving an unusually large amount of stock compensation. These are the kinds of things that can really impact us at tax time. And especially when we’re in the mode of just running things year to year on a W2, when those surprises happen, we can end up with a big surprise the following April because we don’t necessarily think about the major tax implications. I’ll give you an example. If you’ve decided to become an independent contractor as opposed to a W2 employee for much of your career, when you become an independent contractor, you’re going to get very large checks and it’s going to seem wonderful and awesome. And what you do not realize when you’re getting those very large checks is that an amazing amount of taxes need to be withheld. And I’m not talking just about income taxes. I’m also talking about self-employment taxes, which is another 15% on top of what you need to be deferring for income tax. So estimated payments become very important, and we can get in a situation I’ve seen happen before where someone arrives at the end of the year prepares their return realizes oh my goodness I owe 10 15 $20,000 in taxes and funds have not been set aside throughout the year to plan for that.  same thing with selling a house, selling a business, starting a business, selling  a large investment that you’ve held for a long time,  making a distribution from a 401k. These are all kinds of surprise events that I want you to put a little pin in when it happens and think, I should talk with someone about this and I shouldn’t wait until next February. All right? Because there’s things that we can do. Schedule a time with your tax repairer. This ideally is done in a time where they’re not in the middle of a lot of    tax preparation. So,  May, June could be a good time for that.  September, early September, late August could be a good time for that. November certainly  we want to have a time where we’re talking about taxes with our prepare outside the hectic nature of  tax preparation time. And even if you submit April 15th each year, I guarantee you they’re doing a major deadline October 15th as well. They have smaller deadlines around July 15th. So, , just be sensitive to the time frame, but maybe even when you just submit your return this year, say, “Hey, I really want a tax strategy conversation. When can we schedule that?” And they will tell you when tends to be the lulls in their schedule. When you go to that, you want to bring your year-to-date t paystub. So you want to show what withholdings have been done through the year, but you also want to bring information about the surprises. I took a distribution from an IRA. I received an inheritance from my parent. I sold some stock. I have some stock compensation. These surprises bring to them so that they be can become aware of them and you can do something within the tax year about it. We make great decisions when we have time and space to make them. We make very poor and limited decisions when we’re in tax prep mode for the previous year. And then you want a tax efficient approach generally to your investment life. Like there are ways to be tax inefficient. Some of you might have  investment strategies that are kicking out large amounts of ordinary dividends or ordinary income interest payments. You can get a sense at the end of the year that wow it just seems I always owe a lot of extra taxes and say what can I do about that? Right? Let’s talk about two destinations we go to looking for saving money. versus above the line. The line really refers to when we get to our adjusted gross income at the bottom of page one of our return. All right? And the below the line is kind of after that point. So we’ve calculated our income. When we get below the line, we’re trying to make reductions from our income, deductions they’re called, right? But on the first page, we’re trying to change, not necessarily reduce, but change total adjusted gross income. They can have if we if we are lowering it, we can have a favorable effect throughout because often times state deduct  tax for example is calculated off of adjusted gross income. So when we make a change to our income federally, we’re making a change to our income state wise. I say not necessarily down because there are situations where you don’t want to take your income down. And I’ll pause there and say that again because that’s kind of unexpected maybe for somebody who’s trying to help you save money on taxes. But there’s times where you would want to increase income, not decrease income. I’m thinking of situations where I’ve talked to someone and they’ve said, “, wow, we’re really happy that we paid zero% and we were in the 0% bracket for taxes this year. We paid no income tax.” And in my mind, when I hear somebody say that, I kind of cringe a little bit. I’m happy for them because they’re happy they didn’t pay a bill. But what I generally see is if you paid zero in taxes this year, there is a future year where you’re going to pay more in taxes than you might otherwise have to. And we want to think of years in which you’re very low taxable income to take advantage of that low income for potentially realizing long-term capital gains from investments that we’ve held for a long time. We want to look at maybe doing a Roth conversion to shift income in this year expose a traditional IRA to income tax so that we can get then get tax-free growth for the rest of our lives and maybe in even a few years into our heir’s lives as well. All right. There are definitely places where we want to be careful about top ends of income. The most salient of which is this 24 to 32% bracket when someone moves to over $400,000 of  income married filing joint.  we want to be careful because now we’ve kicked into a place where yeah there was a big jump from 12 to 22%. Very common for somebody to be over $100,000 of income. less common to be over 400 and there’s an 8% jump there that becomes really kind of nasty too. All right, there are different rates for income taxes, ordinary income taxes and capital gains taxes even though we pay both on the same tax return. So, we want to keep income below $250,000 when we have    capital gain income. I’ll show that on the next slide. Right now, you can see the 10 and 12% brackets are paying 0% long-term capital gains. Those in the 22, 24, 32, and some of the 35% bracket are paying 15% capital gains rate. This is for anything you held longer than a calendar year. Anything you sell within a tax year, talk about another surprise, right? those who are doing   active trading for the first time in their lives and they’ve been buying and selling throughout the year, they may not think of the fact that when the end of the year comes, they’re going to have to pay ordinary income taxes on all the appreciation. We only incentivize those who hold on to securities for longer than a year in the United States. And then there’s qualified dividend rates as well that typically parallel long-term capital gains rates. So, we don’t want to buy or sell an investment just because of taxes. We want to buy and sell investments because of our long-term perspective on how a company’s going to do. So, you hear people talk about tax loss harvesting. I’ll talk about that in a future page, but there are you kind of think, well, why do I do sales from a portfolio to save my money on taxes? Well, we’ll let’s think broader. One is to manage our net investment income tax exposure. The net investment income tax was created almost 15 years ago as a sir tax to provide additional funding to Medicare. So it is 3.8% on any income above $200,000 if you’re single or above $250,000 if you’re married filing joint. And I did say there’s two different kinds of income. Joel, how does how does that impact those two different kinds of income? So ordinary income, work income, rental income, well rental is a little bit different. We’ll talk about let me go back to that. Ordinary income   money that I earn from independent contracting this kind of ordinary dividends that I receive right from  or interest rather from a bank account all that pours in first right and then on top of that is investment income. So, if I had $175,000 of ordinary income and then I had $100,000 of investment income and I’m married filing jointly, the top $25,000 of that would be subject to an increased 3.8% sir tax. Can I avoid that? I don’t know. I’d have to look at that $100,000 of investment income. But if I could have shifted 25,000 of that out of this year into a future year, I save almost 4%. Right? That’s not  just shifting the timing of when taxes are paid, it’s shifting the tax. And that’s an important thing to consider when you when you know sometimes you’re just shifting the timing of tax payments. That is marginally helpful. But when you’re shifting the percentage tax paid, that’s particularly meaningful. We want to watch out more for those. So, the net investment income, I think of it as almost like an extra bracket on capital gains, right? You 0% up to about 95,000 married filing joint. You have 15% up to 250,000 and then you have 18.8% on top of that. This is something to watch if you have a lot of investment income. Okay. What are the types of income subject to the investment sir tax? We’re talking about taxable capital gains, dividends, passive income, interest, any non-qualified annuity payments. Non-qualified annuity payments are I’m having to pay ordinary income tax and I’m having to pay potentially a net investment income tax. Not fun. and then rental and royalty income. All of those are going to be considered eligible for the net investment income tax. And it’s only that those portions that are above that $2 and $250,000 threshold I referred to. Municipal bond interest is not subject to the sir tax. So we are going to talk about ways to save money.  one of them is going to be by utilizing potentially municipal bonds instead of taxable bonds to get a lower rate of tax. One thing I said, we might want to move money into this year and a Roth IRA conversion is going to do that when we’re maybe retired at age 62 and we’re not planning on taking social security until 67 and we’ve got these four or five years with really low income and we have money in a taxable brokerage account but a lot of money in a traditional IRA account. Well, every year I’m letting that traditional IRA grow. I’m exposing that money to more and more taxation when I hit age 73 because I’ll have to take a percentage of the account out at that point. If in the meantime I can bleed out small amounts from the traditional IRA on an annual basis into a Roth IRA, I can potentially save overall taxes paid. And especially if I look at a situation where I’m in a 0% tax bracket now. I stand to be in a 24 or 32 or heaven forbid a 35% tax bracket when I have to start taking money out of a traditional IRA. My goodness, I really want to be moving money out of those super high-income tax years in the future into the low-income tax years at present to really bring down overall taxes paid over my lifetime. Right.  What is a Roth IRA conversion? When you do a Roth IRA conversion, the government allows you to do move money from a traditional IRA, the entire balance you want to over into a Roth IRA.  You have to watch out because it’s going to be layered on top of your ordinary income. So I’ll have someone come and ask and working here is hey, should I do a Roth conversion? I’m 60 years old and I say, well, are you at the top of your income game? Yeah, absolutely. I’ve got higher income tax than ever before. Okay, that’s not the years for a Roth conversion. A Roth conversion is in years where you have lower than expected income or lower than what yeah future income taxes are going to be. So you have more control. You’re kind of using that pressure release valve to take some money out of that traditional IRA as your choice to control taxation. The advantage then from that point forward is you can asset allocate I’m sorry asset locate. The advantage from that point is that you can out asset locate your portfolio. So in other words, you can put tax friendly and unfriendly investments in a traditional IRA, tax friendly investments in a Roth IRA and the tax friendliest of investment is a high expected return investment that I’m not going to have to pay taxes on because it’s growing tax-free. So we want to be very careful not only about allocating our assets correctly, but we want to consider locating our assets correctly. tax inefficient in traditional IRA, t high growth expected return in a Roth IRA, everything else in a taxable brokerage account. Sometimes we only have one kind of account and we do what we can then. But maybe even then when you only have an IRA, you could explore diversifying out into a traditional IRA and a Roth IRA.  used to be that you could only do these kinds of maneuvers in IRA world. you now typically look at your plan, but you should be able to do Roth conversions inside of a retirement plan, too. Now, and so that gives you additional flexibility. It still can be better to make the change outside. And I say that because some retirement plans do not allow you to control which investments go in which portions of the account. You want your Roth money to be more aggressive than your traditional money. So, maybe it’s still better to use an IRA, but you can do it inside a retirement plan. after you die. So, we get this tax-free growth element on a Roth IRA, but also after you die, that’s going to be advantageous to your heirs. Your heirs who receive a traditional IRA from you, , if they’re your children in particular, are going to have to take all those amounts out in 10 years, 10 calendar years. Up until about 5 years ago, they could take it out over their whole lifetime, but now they have 10 years. As a result, if they’re inheriting a traditional IRA, there’s going to be a lot of taxes paid in a consolidated amount of time. If they’re inheriting a Roth IRA, they can continue to grow that Roth IRA for an additional 10 years tax-free and then remove the assets from that at the end. So, even when you’re running an analysis, you’re saying, “Well, I’m not sure how long I’m going to live. It’s I’m really going to save that money doing a Roth conversion.” Well, if you want to factor your children’s tax rates into the equation, you could save quite a bit more by utilizing that Roth conversion because expand out 10 years past your death to the tax-free growth benefit that is going to be extended, right? We can make our portfolio tax efficient. I was referring to this a little bit earlier.  if I’m in the 22% tax bracket for my ordinary income, I’m probably not going to use a municipal bond. And unfortunately, I’ve certain circumstances where people have municipal bonds in their portfolio when they’re in that tax bracket. Why do I say that? The reason is the bond market is very efficient, right? And when you are paying for excess risk, that is built into the interest rate that is  yield yielded from the bond investment. But when you have a municipal bond versus a taxable bond, they do a pretty good job of kind of discounting the interest rate on a municipal bond to the point that it’s really only efficient for somebody who’s in a very high tax bracket. The 32, 35, 37, definitely 24, not as much. 22 and below, it just depends on the situation, depends on the current market environment. In most market environments, municipal bond portfolio for somebody in a 22% tax bracket or lower is going to cost you money, not save you money. Now, how do you figure this out? Well, it’s really hard to figure out. The reason it’s hard to figure out is because you get your investment return on one statement and you get your tax bill on another statement, the tax return. And so, it you don’t blend the two. No one is going to report to you your after-tax return on your portfolio because everyone’s tax rate is different. No one’s going to report their after-tax return on their tax return because that’s just going to be taxes. But the only thing that matters to you as an investor, at least should matter at the end of the day, is your after fee after tax return on your investments. And it’s very difficult to find if you’ve been using a municipal bond allocation. You’ve got to go to a professional probably to look at, well, what’s my marginal tax rate? And so what taxes am I really saving when I’m using this municipal bond strategy? Then compare that against what a taxable bond strategy would get you. And then you say, well, the taxable bond strategy, I’m going to have to pay taxes there, aren’t I? Yeah, but it could be that you still after tax get a higher yield than you did with paying no taxes on a MUN bond. And this is what one of those places I don’t want the tax tail to wag the life dog, right? It’s sometimes it is more favorable to do that, but just because you’re paying lower taxes doesn’t mean you’re getting better returns. It depends on the situation. Okay? And we can maybe even look at things and say, well, let’s just put the bonds inside of an IRA. The bonds are in a traditional IRA. There’s no tax on the dollars kicked out in income there. There’s tax on the growth, but that’s leading to a lower growth strategy in your traditional IRA, which could be desirable. I’ve had people come to me and say, ‘I wonder why I don’t earn as much money in my traditional IRA. Is my advisor doing a good job? Well, if your Roth IRA is growing a lot more than your traditional IRA, your advisor is probably doing quite a good job because that’s what we want, right? We don’t know where the return happens matters.  so consider that that’s an asset location strategy. And if you’re wondering if you’re implementing that, talk to your adviser. Ask, hey, are we using an asset location strategy? Because asset location is something that a tax aware advisor should be helping you with. What’s another above-the-line strategy? We can maximize our 401k. So for younger than 50 in 2026, we can put $24,500 into a 401k up to 100% of our income. If we’re 50 and older, then we can make an extra $8,000 of contributions.  many cases those extra $8,000 of contributions now have to be Roth. So watch that. Talk to your HR team. Make sure you’re okay with that because the catchup over certain income thresholds has to be Roth. If you’re not taking advantage of your companies that now I’m going to underline and highlight I mean this recommendation the third bullet here critical. Most people are doing this great glad you are. But if you’re not if you’re not taking advantage of your company’s 401k match, you are walking away from says here dollar for dollar. If your company matches 50%, then it’s 50 cents on the dollar. But regardless, I can’t find you an investment that is going to return you a guaranteed 50% 75% 100% whatever that match is on that retirement plan that you have through work. So we want to take advantage of free money, right, wherever we can. And so even in situations where you’re paying down debt, I would suggest making sure you’re taking advantage of a 401k match that it’s available to you because the debt’s not costing you 50% a year. It’s certainly not costing you 100% per year. And if you can get that match, then the numbers are working out in your favor long term. I’m not saying don’t get out of debt. Get out of debt. We and we can have a separate conversation about that. Another thing that we can do above the line. Now, this is stretching into where I was saying there’s that dot dot dot. This is kind of an above-the-line strategy, but it’s kind of like a phantom never existed strategy. Okay. Qualified charitable distributions. If you haven’t heard about them, you need to write that one down. It’s one of the most important ways of giving to charity in retirement. Once you turn 70 and a half, you are permitted to take money from your traditional IRA and give it directly to a charity. Say that again. Once you’re 70 and a half, you’re permitted to take money from your traditional IRA and give it directly to a charity. Now, you say, “Well, why would I do that? What’s advantageous about that?” It’s a tax-free withdrawal from your IRA. So in many situations where up until that point up until 70 and a half maybe you were giving appreciated securities because you knew there was better ways of giving or if you were giving cash. If you’re giving cash know that you can give appreciated securities to have a conversation with an adviser about that. But once you turn 70 and a half you can use a qualified charitable distribution to take money directly from your IRA and give it to a charity. The advantage to this is you’ve now taken down the balance in your traditional IRA and you’ll be subject to lower required minimum distributions than you would have been otherwise. And you kind of treated your traditional IRA like a Roth IRA in that little sliver, right? Because you got growth tax deferred and oh, never mind, growth tax-free because I gave it straight to a charity. Now the sugar on top is when you turn 73 and you have to take money out of your IRA. Qualified charitable distributions that you are making count toward the required amount that you must take out that year. So let me give you an example. Let’s say I have an IRA and its balance is a million dollar. In the first year I’m going to have to take out roughly $40,000 from it. But I give $5,000 to charity and I do it with a qualified charitable distribution. 5,000 from my IRA straight to charity. Well, now my required distribution amount just dropped to only $35,000. So, do you see how I say it’s kind of phantom? It’s money that never entered the tax return at all. Right? You don’t you don’t have to recognize that as income because you gave it straight to a charity. And in most situations when someone is  70 and a half and older, they are probably not taking advantage of itemizing their deductions on their tax return. Meaning their standard deduction is high enough that whatever they’re giving to charitable charity is not getting them up over the threshold to have that start counting. So to move it from even a world where part of the charitable giving counts to maybe none of it over to a world where 100% of the charitable giving counts because I took money tax free out of a traditional IRA. That’s one of the best strategies that we can use. All right. For tax year 2026, $111,000 in QCDs may be made per year. Not saying to make that much. And this is another good place for me to come back to. Don’t let the tax tail wag the life dog. We don’t give to charity purely for the tax savings because let me go back to that world where I was going to have to take 40,000. Now I only have to take 35,000. That 5,000 I gave to charity. If I hadn’t given to charity, somewhere between three and $4,000 of that money would have come to me. It would have gone to my bank account. So I’m giving up access to that money. The reason I did that is because I was already inclined to give to charity and I want to save as much tax dollars as I can. So sometimes someone will come to me and ask, “Hey, should I be giving to charity more to knock myself down to a lower tax bracket?” Not really, because anytime you give to charity, you are taking money out of your pocket and giving it to the charity. Are you saving tax dollars? Yes. So I maybe say, “Well, would you like to save 40 cents on the dollar for your charitable gift?” So 60 cents comes from you, 40 cents from the federal government. Yeah, that that sounds okay. All right. Well, then maybe that’s what we want to do. But 60 cents still comes from you, even in a very high tax bracket. And probably you’re in a low t lower tax bracket than that. So we have to watch that. All right, those are our above the line strategies. Now, let me talk to you about some below-the-line strategies. So now I’m saying we’ve calculated our adjusted gross income. What deductions can we have to reduce income to when to then when I run my taxable income number? 2025 deductions are up here for now since it’s silly in everybody’s mind. You can look up 2026. We’ll plug those in a future visit, but there’s nice round numbers for 2025 as well. You got a $15,000 standard deduction for single filers. You got a $30,000 deduction for married couples filing jointly. And everyone 65 or over gets an additional $1,600 to $2,000 per person in standard deductions. So we can get to a very high standard deduction. Medical and dental expenses are only deductible when they cross 7.5% of AGI. Anything under 7 and a half% of AGI is not helping you. And charitable donations for 2025 have no AGI threshold. Give it give what you want.  you are capped for the current tax year to getting  30%  fair   there’s 30% AGI limitation for certain kinds of charitable gifts 60% for others but for most of us our charitable deductions realistically are just fine right we can get deduction however this is territory definitely where I talk to people and say are you saving money with your charitable gifts they’ll say yes I’m saving money with my charitable gifts I save everyone I make throughout the tax year. I give it to my tax preparer at the year end. I know that I’m saving money and I say, “Well, let’s look at your schedule A.” And sometimes we look at the schedule A and we realize they are taking the standard deduction. So, they’re doing all that work tracking their charitable gifts throughout the year. They think they’re getting a tax break for the gifts that they’re making and they’re getting no tax break. And the reason is the standard deduction is just so high in our country right now. This is this is an advent of the last eight years or so.  it was the first Trump Tax Cuts and Jobs Act that that triggered this that really far fewer people are getting a benefit from their  charitable giving, particularly those who are retired and no longer have a mortgage. So there’s no deductible mortgage interest. They’re capped on their    itemized deductions for state and local tax. Same thing for medical and dental. like you can track those expenses, but unless you think they’re going to be greater than 7 and a half% of your AGI and you think that you’re going to have other deductions in other areas that are going to take you over that $30,000 level for standard deduction filing joint, you pro you probably don’t need to be tracking all the medical deductions on your  tax prep. It should save you some time. I know it’s a headache to pull all that together. Couple things that I’ll note here that are changing for 2026 that we want to keep in mind. Number one, charitable donations are going to have an AGI threshold. It’s 0.5%. So, if I make $100,000 and  I want to deduct my charitable contributions, the first $500.5% of $100,000, the first 0.5% $500 would not be considered deductible. I only the portion that is above that threshold would be deductible. That’s something new. It does mean that maybe when you’re doing your 2025 tax prep, you know, you want to keep in mind that change so that you can be mindful of an alteration that’s going to happen in 2026. Another is that deductions that you’re going to be able to get $6,000 per person in deductions for seniors. This is what’s called the no taxes on social security, but in actuality, it has nothing to do with social security. You can claim it or not claim it. If you’re 65 or older, you get to claim an extra $6,000   deduction per person over 65.  and that in essence reduces to eliminates potentially the social security taxes in income taxes if you have them. Okay. What are some other things we can do? We can use appreciated securities in our charitable giving. So I want to get a tax deduction for giving to charity. Yes, absolutely. That is a question mark as we just said whether you’re going to get a deduction for that or not because you have to figure out if you automize. One thing I can tell you though that you can avoid no matter what is when you use appreciated stock to give directly to charity, you can avoid the capital gains tax on that distribution. Okay, on that contribution. So I bought stock five years ago. It’s had a huge appreciation. I paid $1,000 for it. it’s now worth 10. I decide, hey, I’m going to use that to give to my charity this year in lie of cash. I just avoided a long-term capital gains tax on $9,000, the appreciation since the point at which I purchased Nvidia. That said, I could say, well, wait a second. I still want to own that stock. Why would I be doing that? Okay, that’s fine. give that appreciated stock to the charity and then take the $10,000 of cash that you were going to go to give to the charity and purchase $10,000 of Nvidia. That is going to get you to the same place except now you’ve got a $10,000 cost basis in Nvidia for future decisions you make instead of a $1,000 cost basis. All right. So, you can there’s great ways of saving long-term capital gains taxes when we’re already charitably inclined to use appreciated securities instead of cash. Some of you say, “Well, my charities are pretty small. I I don’t think that they’re going to accept appreciated securities.” My answer is you would be surprised. A number of institutions that you would not think like your local church that doesn’t have other branches, it’s just one local parish. You may be surprised, they have a brokerage account that accepts appreciated securities. Then you could also think, well, wait a second. I don’t want to ship this tax burden on to them. Don’t worry about it. They’re not going to pay the taxes either. They are able to sell that security tomorrow and pays zero tax. So, everybody wins. This is a great strategy. The next strategy we want to consider here is a donor advised fund. So, a donor advised fund, think of that like giving appreciated securities to charity, but putting it into a holding account first. kind of a like a reserve place before I actually give to the charity. Donor advised funds have been set up by major institutions. They want to run this because they want to collect fees on dollars. I’m not saying this is a zero cost game, but like Schwab, Fidelity, American Endowment Foundation, other institutions out there all run donor advised funds. The idea with a donor advised fund is you give the money now into the fund, you get the tax deduction now. You later on can make gifts from the fund whenever you want to and get   you know the benefit of having given to those charities. You don’t get an additional deduction. All the deduction happened at the point of funding the donor advised fund but you can invest inside of that fund. You can grow it over time.  so why would I use a donor advice fund? The most basic reason, even for those who aren’t looking to bunch, which I’ll show in the next slide, but the most basic reason is to say, well, I give a few hundred dollars to a whole lot of different charities, and I don’t want to have to worry about giving appreciated stock to each one of those charities. Great. Give the money into the donor advised fund, then make grants from the donor advised fund to each of those charities, and you didn’t have to use appreciated stock then. Okay. The other logic that is even more valuable is that you can bunch. What do I mean by bunching? Well, I said before, what if my charitable gifts are not helping me from a tax perspective, but I’d like them to and I know that I’m going to make charitable gifts for the next 5, 10, 20 years, especially if I’m in a very high-income tax year. I may want to accelerate all of those future charitable gifts into the current year. By doing that, I’m able to shift a massive tax deduction into the current year. So, what happens here? Option one is making direct gifts each year, and you’re just using 30,000 of deductions over five years. So, this is a total of your mortgage interest and all deductions. You’re only, so let’s say that you have $20,000 in other deductions and you’re doing $10,000 in charitable giving. All right? And that gets you to 30. Well, 30 was a problem, right? Because the standard deduction is 30. And so every dollar I’m doing to charity is not helping me. 1 2 3 4 5. But in option two, I bunch five year’s worth of charitable donations into year one by funding a donor advised fund. And then I give from that donor advised fund in years two through five to my charities. Well, guess what? I still take standard deduction each of those future years. I have not harmed myself in the future years, but I’ve created a massive tax deduction in the current year. That’s the steroids version of using a donor advised fund. So, we put a whole lot of money into the donor advised fund upfront and then we gift out of it over time to give to charities over a period of years. Okay, huge potential savings below the line. So, what are my opportunities for saving below the line? Not as strong as they used to be, I will say itemized deductions are a lot trickier. We do have this new from 2026 and beyond, we’ll get this $40,000 state and local tax cap instead of $10,000 state and local tax cap. That’s a nice added little bonus from the most recent tax bill last year. That’s accessible to those with incomes at lower thresholds. If you have higher levels of income, maybe you’re not going to get that. But we are in a world where still bunching charitable giving can really help a lot, right? Let’s look at Secure Act 2.0. What provisions came from that? There were some changes that came in year one. I mean, it was signed in 2022, but year one was really 2023. And that was when some of you are on here thinking, why is he saying age 73 for required minimum distributions? Isn’t that say 70 and a half? It’s not 70 and a half.  it’s age 73 now. was created by the secure act 2.0. It’s actually going to increase to 75. Anyone in 2033 who was going to turn 73 that year, don’t worry about it. You got another two years.  and you can wait till you turn age 75. The excise penalty for RMDs has been reduced. So this just says in the past there was this major 50% tax that you had if you did not make the required distribution when you were supposed to make it.  now it’s 25% and if you make the change in a timely manner’s only 10%. Point of fact, I think this actually might be a tax increase because there were a lot of situations because of how high the excise penalty, the IRS was pretty liberal in waving it. And I would think they’re actually going to be a lot less likely to wave a 10% penalty or a 25% penalty than they would have to wave a 50% penalty. Okay? But we so we still want to make sure we make the required distributions when we’re supposed to make them. But if we make an error, in theory, there’s a lower tax due than there used to be. Then we had changes in 2024. We started to say that all right pre-death required distributions from Roth 401k plans are limited that for some reason you had to take money out of a Roth 401k before you were deceased and that was silly and they took it out. 529 plans were allowed to be  rolled over into a Roth IRA a portion of up to the annual contribution maximum which this year is $8,000. You put the money over from 529 into a Roth IRA in the same beneficiary’s name. The plan has to have been opened for 15 15 years and the it must be in the name of the beneficiary and anything that you put in over the last five years can’t be moved. So, this is not something where you could put in $8,000 and immediately moving it over into a Roth IRA. That doesn’t work. But, we have actually a new outlet then for all these 529 funds that some people have oversaved into overtime. In 2025, we started a new catchup limit for ages 60 to 63. So now, instead of just an extra, what is it? $8,000 that you can put in right now as a catch-up, you if you’re between 60 and 63, you can put in an extra $12,000. In 2025, it was $11,250. 150% of the regular catch-up amount. So, you know, these don’t tend to be the biggest outcomes for people, but if you’re looking for a tax deduction, , and you know that you know, you’re going to be retiring soon and you’re in higher levels of income now that you’re going to be in retirement, this could be an excellent tool to use in 2026. , we have now have a mandatory Roth catchup contribution. So, this is I was referring to earlier. If you’re 50 or over and you earn more than $150,000 in wages, you have to contribute the catchup via Roth, not via pre-tax. So, you can’t get a tax deduction for your catch-up contributions. Still, you can for your regular. And then your super catch-up contribution there. You have a limit of $12,000 in 2026 above the standard $8,000 limit we said. and  increased contribution limits that happens every year but for 401ks 403bs 457bs it’s now 245 $24,500  for 401ks 403bs and 457bs it’s now $24,500 if you’re under 50 that you can contribute right so those are the kinds of things going on one other thing to consider I mean as we’re just throwing out ideas here for those who you I’m more than anything else trying to get you to put a pin in something that seems like it might be relevant for you sometimes, right? Hopefully, you’ve been taking notes and some things seem like, “Oh, that helps me.” It’s okay if a bunch of these don’t help you. I’m talking to a pretty wide audience, but if we come out away from this with three things that are helpful, then that that’s going to make a difference. But we can do charitable trust. And when we make a charitable trust, we’re setting something up where we give money to charity either on the front end or the back end of the trust. and we’re also contemplating giving money to beneficiaries of ours. All right. In the case of a charitable remainder trust, what we’re saying is, hey, we’re gonna make payments out to my beneficiaries, maybe my children over a period of years, and then at the end of the term, a charity is going to get whatever’s left. And the charitable lead trust is just the opposite. The charitable lead trust says, “Hey, we’re going to pay money out to my charity over a period of years, and then if any money’s left, that’s going to go to my children.” Now, why would you want to do these? Well, for one, it’s a good way of getting to college giving group off your back who’s always reaching out to alumni and saying, “Hey, what are you going to give to us this year?” You could set up this charitable lead trust. Say, “Hey, you don’t need to call me anymore. I’m setting up this charitable lead trust. You’re going to get a payment of this amount every year for the next 10, 15, 20 years. The end of that time period, you’re going to get money to your kids. Now, what are you going to get in the meantime? You’re going to get a very large charitable deduction in the year of the gift. So, this is like a donor advised fund, but potentially more powerful. Depends on how you do it. Okay.  so again, we’re another place where we’re saying don’t do this unless you already charitably inclined. But if you are charitably inclined, you have vehicles available to you. Let’s wrap up the day talking about business succession. We have to think about this because there’s I think I said at the beginning, there’s very few points in your life where you’re going to pay more taxes than when you sell a business. And we want to think in advance about that. We do not want to be looking at a tax return after that you’re selling a business and have set a pile of cash aside saying, “Well, I don’t know how much I’m going to need, but I know I’m gonna have to pay taxes for selling that business.” That’s not a good outcome. What we want to be instead is proactive and say, “Hey, I want to get a gauge on how much am I actually going to owe when I sell this business and is there anything I can do to reduce that?” So, I’ve got some things up here for you to consider. What? Number one, you want to get a valuation of your business because that is going to help you figure out, okay, what is the capital gain potentially going to be when I sell this business? That allows for conversation well in advance of going out on the market and seeking out buyers to get an idea. Okay. Tax strategies. We want to use strategies wherever we can to minimize capital gains, estate taxes, gift taxes, income taxes. How do we do that? The number one strategy that’s available now  that that never was in the past is tax aware loss  long short strategies.  this is something that if you have not heard of, you need to sit and you own a business, you need to sit down with someone and get educated on it because you are now able to  use other funds potentially in advance of the sale of the business to bankroll losses over the period of time up to the sale or in the year that you do the sale. If you’re able to do the sale early enough in the year to invest a portion or all of the proceeds from the sale to kick off a ton of tax losses to hedge offset shelter the tax bill that you were going to pay that year. There’s a lot more detail to it. Talk about a big pin. If you want to have a conversation with someone about learning about how to save a lot of tax on selling your business, that is key. talk to a tax aware CPA or an adviser, financial adviser who is versed in this. There’s a lot of people who don’t know about this still, but there is no better way I’m aware of to save taxes on business sales.  You know, the only one other way if you set it up to begin with is a qualifying small business. That would get you zero tax. But generally, I talk to people and it’s too late for that. They’ve been running the business for a number of years. That’s something you could consider. You want to look at buy sell agreements.  make sure that they’re optimized. You’ve set a predetermined price in terms if something happens to you, someone else is going to purchase your business. Oftentimes, that’s funded with life insurance. Do not put yourself in a situation where you’re running a business as the sole owner. You do not have a buyer identified and a lot of the value of your business is a result tied up in you. When the surprise happens and then there’s no liquidity for the other person to potentially buy your business, your heirs are meaningfully disadvantaged. We’re talking about something that was your major retirement plan over the course of your life. You put your blood, sweat, and tears into this business. You want to extract real value from it either through a sale or through some kind of private sale that happens at a unexpected death like a buy sale funded by life insurance. You want to make sure that everything’s been done to contemplate your business in your estate plan to make sure you’re taking advantage of whatever exemptions are available to you, that you’ve used whatever trusts you should use to control the business, okay, after your death. Use employee stock ownership plans. It can be tax-deductible for the business that allow for an interesting way of transferring ownership. Look at your employee compensation benefits. Are you doing everything you can to minimize your taxes there?  so this was designed by just to get you thinking right to kind of pump the brain cells to thinking about all right well wow it is time to think about someday I’m going to sell this business and I have to optimize it just like the overall call today has been about hey let’s orient ourselves toward taxes in a strategic forward-looking way as opposed to a retroactive what happened last year way right reporting on last year very unhelpful for saving us money on taxes. is generally thinking about what may happen this year. Very helpful. Okay.  There’s going to be a link posted in the chat right now that’s going to allow you to schedule a free 15-minute introductory call. I’d be happy to make sure an Savant advisor talks to you about your particular questions, please. I’m going to take some time for questions here at the end and then of all of our disclosures that post at the end of our presentations here. Okay, I’ll stop sharing here screen and I’ll go to some questions. , let’s see how many I can handle with the time we’ve got left here.

All right.

When do I pay taxes on a Roth conversion? That’s a great question. So, you pay income taxes and I did not talk about this in enough detail. So, let’s go into that one more time. A Roth conversion is moving money from a traditional IRA over to a Roth IRA. It’s considered a taxable transaction, but you are allowed to move the whole amount over. So, let’s say I move $30,000 from my traditional IRA to my Roth IRA. I’m going to have to count that $30,000 as income in my current tax year. I will get a 1099. It’s going to show that I had taxable income, and I’m going to have to come up with the tax from another source, a bank account, a taxable brokerage account. Sometimes you say, “Well, wait, why don’t I just take it from the traditional IRA?” Pretty much all the benefit is taken away if you pull money from the traditional IRA to pay the taxes. You might as well just have not done it. You want to move the whole amount over from the traditional IRA to Roth IRA, which means you need to have another source for covering the taxes on the bill. So, this is very important when you’re sitting down with someone and thinking, I want to do a Roth conversion this year to estimate what the tax liability will be and to make sure you have enough cash set aside in reserve to cover the taxes on that. Okay, it’s the current tax year. Can I contribute to my donor advised fund with a QCD? No, you cannot. Great question. Okay, I said that you can take money for as a qualified charitable distribution and give it to a 501c3 charity. And technically a donor advised fund is a 501c3 charity, but there is a carveout. They say you are not allowed to move money via a qualified charitable distribution into a donor advised fund. It has to go directly to an end charity. All right, so that’s an important clarification to something we talked about earlier. You cannot contribute via a qualified charitable distribution to a donor advice fund. If I’m selling my business in 2028, can I do anything now? Oh, yeah. Absolutely. Right. I mean, we were talking about that a little bit there at the end, but there are great things that you can do to create taxable losses over the upcoming two years to get yourself into a position to minimize tax liability. There might be things that you want to do with business form as well. , yeah, it it’s a good thing to talk to somebody. I mean, and that that’s a great question because I’d love to hear somebody thinking about a business sale so far in advance. I’d love to have you thinking about it 5 years in advance of a business sale because there’s ways that you can prepare yourself from a tax perspective. Is it too late to contribute to an IRA for 2025? Oh, no. It is not too late to contribute to an IRA for 2025. You have until April 15th to do that. So, one of the few things you still can do for the prior tax year to alter prior tax year stuff and deciding whether you should or shouldn’t is a question for you and a tax adviser or a financial adviser. When is the best time to contribute to a Roth or a traditional IRA? Okay, I think. All right. The way I think I’m going to phrase that I think they’re asking within the tax year, what’s the best time to do it? So, this is one of those unknowables about investing. I always try and studiously tell people you can never predict what’s going to happen in the next 12 months to investment markets. That said, the best time to contribute to a Roth IRA would be whenever the market is lowest for the year, right? When the market is lowest for the year, you make your Roth IRA contribution, you invest it immediately, and you maximize the growth potential of that, for a traditional IRA, it’s probably a lot more neutral. I mean, you’d say, “Yeah, contribute at a time the markets are down.” But I really get more on the distribution side for a traditional IRA. The ideal time to take money out of your traditional IRA is the market high, right? When the market is at its high point of the year and you take a traditional IRA distribution out, you’re taking a smaller percentage of the overall account out. And so, that’s an ideal time. There’s not really an ideal time to contribute to a traditional IRA, but definitely a Roth. The problem, nobody knows when the low for the tax year is going to be. So, if you can do that, I have an open position on my team at my office. I’d be glad to have you join us. We could really use a prognosticator like that. So, that’s the time we had today.  Please, as I said before, if I haven’t gotten time to answer your question, post it in the survey that comes to you at the end, and we’ll be sure to get somebody back to you to answer the questions you have.  wish you the best of luck in filing 2025 taxes and in thinking strategically about 2026 taxes. and we’d be happy to talk with you for 15 minutes about your situation if you’d be interested. Have a great day. If you enjoyed this webinar, visit savantwealth.com/guides and download our complimentary guidebooks, checklists, and other useful financial resources.