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[00:00:05] Jeff: Welcome to our podcast. I'm Jeff Vistica, your host. And today we're tackling a topic near and dear to me, yearend tax planning. Joining me is my partner in tax strategy and someone who knows this stuff inside and out, [00:00:20] Dan Vistica. Dan, it's always great to have you here.
[00:00:24] Dan Vistica: Thanks, Jeff. It's great to join you.
[00:00:27] I love these conversations because we can really dive into the nuts and bolts of tax planning. Let's bring some clarity to these
[00:00:35] strategies.
[00:00:37] Jeff: Absolutely. Today we'll cover [00:00:40] tax gain and loss harvesting, Roth conversions, charitable giving, and estate and trust planning. These are areas where a little work now can make a huge difference come tax season.
[00:00:51] Ready to jump in,Dan?
[00:00:52] Dan Vistica: Let's do it.
[00:00:53] Jeff: Let's start with tax gain and loss harvesting. It's a term that gets thrown [00:01:00]around a lot, but I think it's often misunderstood. How do you usually explain it, Dan?
[00:01:06] Dan Vistica: For me, it's about being proactive. Gain harvesting is selling investments that have appreciated to lock in today's tax rate if you expect it to increase.
[00:01:17] Tax loss harvesting, on the other hand, [00:01:20] involves selling underperforming assets to offset gains or even reduce of ordinary income up to
[00:01:26] $3000
[00:01:28] Jeff: and there's a tactical side to both strategies. For gains, you can immediately reinvest in similar assets. So lets you reset your tax basis higher, which may help [00:01:40]minimize future gains.
[00:01:41] For losses, though, you have to avoid repurchasing substantially identical securities within 30days or you lose the tax benefit due to the wash sale rules.
[00:01:52] Dan Vistica: I agree, Jeff. It's important to think about the longer term implications.
[00:01:56] Jeff: Couldn't agree more. And I think it's also about asking, [00:02:00] what's my tax rate now versus what it may be later?
[00:02:03] If your future rate turns out to be higher, gain harvesting can be a real winner. Speaking of timing, let's talk about Roth conversions. Dan, I know you've helped a lot of clients navigate these. Why are they so powerful?
[00:02:19] Dan Vistica: The big draw [00:02:20] is tax free growth. When you convert a traditional IRA to a Roth, you're essentially pre paying taxes now to avoid paying them on withdrawals later.
[00:02:31] If you believe tax rates will increase Or if you're currently in a lower bracket, have charitable deduction carryovers, maybe even some ordinary [00:02:40]losses, it's a no brainer.
[00:02:42] Jeff: Agreed. And let's not forget the flexibility. Roth IRAs don't have required minimum distributions, so you're not forced to withdraw money when you might not need it.
[00:02:54] Dan Vistica: Exactly. But conversions aren't for everyone. The tax on the [00:03:00]conversion can be steep, and if you don't have cash outside the IRA to pay it,
[00:03:08] Plus, pushing your income into a higher bracket or triggering other costs, like higher Medicare premiums, could offset the advantages.
[00:03:17] Jeff: That's why this isn't a one size [00:03:20] fits all strategy. It's about running the numbers and understanding your goals. Let's pivot to charitable giving. Dan, I know this is a favorite strategy of yours, especially around the holidays.
[00:03:32] Why is now the perfect time to focus on this?
[00:03:35] Dan Vistica: Because it's a win win. You can support causes you care about while [00:03:40]reducing your taxable income. Qualified charitable distributions, or QCDs, area great example. If you're 70 and a half or older, you can direct up to 105,000 from your IRA to charity, which satisfies your required minimum distribution without increasing [00:04:00]taxable income.
[00:04:01] If you're married and filing jointly, your spouse can do their own additional 105, 000 QCD.
[00:04:09] Jeff: And for those not eligible for QCDs, donating appreciated assets like stocks is another smart move. You avoid capital gains tax and get a deduction for the asset's [00:04:20]full market value. It's one of the most tax efficient ways to give.
[00:04:24] Dan Vistica: Absolutely. Taxpayers certainly have a lot of tools to give to charity in a tax efficient way. I'd say it almost never makes sense to donate cash. And for clients with larger estates, gifting now can lock in today's [00:04:40]generous gift tax exemptions before they potentially drop after 2025.
[00:04:44] Jeff: So
[00:04:45] charitable giving isn't just generous, it's strategic.
[00:04:49] Finally, let's touch on estate and trust planning. Dan, this is an area where timing and preparation really matter.
[00:04:59] Dan Vistica: [00:05:00]Definitely.
[00:05:00] With the estate tax exemption set to shrink after 2025, it's critical for high net worth individuals to act now. Making large gifts today can mean significant savings in estate
[00:05:13] taxes later.
[00:05:14] Jeff: And for those without massive estates, trusts can still be a game changer. Whether it's [00:05:20]minimizing state taxes, Protecting assets or ensuring your wishes are honored.
[00:05:25] Dan Vistica: Exactly! The key is starting early. Trusts take time to set up and gifting strategies need to align with your
[00:05:34] overall financial plan.
[00:05:36] Jeff: It's all about building flexibility into the plan.[00:05:40]
[00:05:40] The sooner you start, the more options you'll have. Alright, let's wrap things up with some quick takeaways. First, don't procrastinate. Many of these strategies need to be in place by December 31st. Second, consider gain and loss harvesting, Roth conversions, and charitable giving [00:06:00]to optimize your taxes. And third, don't overlook estate and trust planning to protect your legacy.
[00:06:07] Dan Vistica: And remember Jeff, these aren't just tax strategies, they're financial strategies that may help families carryout their life goals. Done right. They don't just save money. They give you peace of
[00:06:19] mind. [00:06:20]
[00:06:20] Jeff: Well said, Dan. Thanks for sharing your insights today. And to our listeners, if you have questions or need help implementing these strategies, don't hesitate to reach out.
[00:06:32] Dan and I are hereto help.
