About the episode:

Are you looking to help your clients navigate the complex world of taxes and avoid costly mistakes? Join host Dave Alison and lead advisors at JL Smith Holistic Wealth Management, Jeff Warnkin, CFP, CPA, and Seth Meisler, CFA, CPA, as they dive into the critical topic of marginal tax traps and how financial advisors can help their clients steer clear of these pitfalls.

Drawing from their extensive experience and expertise, they share valuable insights on identifying, understanding, and mitigating these often-overlooked tax challenges within the framework of The Tax Management Journey®.

Key Points Discussed:

• Defining Marginal Tax Traps: Understanding what qualifies as a marginal tax trap and how they impact clients.
• Common Scenarios: Exploring situations where clients frequently encounter marginal tax traps across different life stages.
• Social Security Taxation: Examining the “tax torpedo” effect and its implications for retirees.
• Asset Location Strategies: Discussing how proper asset placement can help avoid unexpected tax consequences.
• Situational Tax Traps: Identifying specific traps related to business income, stock options, and real estate investments.
• Tax Credit Considerations: Understanding how income changes can affect valuable tax credits like the American Opportunity Tax Credit.
• Healthcare Subsidies: Exploring the impact of income changes on Affordable Care Act premium subsidies for early retirees.
• Required Minimum Distributions (RMDs): Discussing how RMDs can trigger various “stealth taxes” and planning strategies to mitigate their impact.
• Legislative Outlook: Examining potential upcoming tax changes and their implications for tax planning.
• Effective Tax Rate Analysis: Using overall effective tax rates as a tool for long-term tax optimization.
• Multi-Year Tax Planning: Emphasizing the importance of looking beyond single-year tax scenarios for comprehensive planning.
• Tax Return Review: Highlighting the advisor’s role in catching and correcting potential tax return errors.

Listen in to learn how to enhance your tax planning services, provide more comprehensive guidance to your clients, and help them navigate the complexities of the tax code while avoiding costly marginal tax traps.

Resources:

• Training Referenced: The Tax Management Journey®
• Training Referenced: The Bucket Plan® 1.0