Where do I Start?

I have onboarded thousands of clients who began with little or no prior tax planning. My approach is to guide clients through the foundational steps of tax planning first, then address more complex strategies once a strong tax-efficiency framework is in place.

When working with a new client, I generally begin with the assumption that no prior tax planning has been done. While that is not always the case, it is the most thorough and effective way to identify opportunities. From there, we start with the most fundamental—and often most overlooked—ways to reduce tax liability.

Make sure Investments are held in the right type of accounts

There are two ways to hold your investments. The first is in a taxable account, the second is in a qualified account.
A taxable account is an account where all income is taxable in the year it is earned. If you have interest, dividends or capital gains (the type of gain realized when you sell an asset for profit, like stock). These accounts report income to you on Form 1099 or on a Schedule K-1, depending on the investment. The point with a taxable account is that income is taxed immediately.
A qualified account refers to a type of account that has tax benefits, like a 401K, IRA or a Roth Account. Income is not taxed annually like a taxable account. Rather, the income is either taxed when money is taken out (401K, IRA, 403b) or not taxed at all (Roth). Investments annually realize taxable income such as interest, dividends or ordinary income should be in a qualified account. In that setup, there is no taxable income to increase your tax bill. Investments whose performance is mainly growth, belong in a taxable account since there will be little taxable income generated.

Have one financial quarterback for your Investments

You can have the most tax efficient mutual fund in the US but that doesn't help if the rest of your portfolio is not tax efficient.
What does “tax efficient” mean? One aspect of tax efficiency is offsetting taxable capital gains with capital losses, a strategy commonly known as tax-loss harvesting. In a tax-efficient investment portfolio, projected capital gains are typically evaluated toward year-end. Based on that estimate, investments with unrealized losses may be sold to offset those gains. This process helps reduce net capital gains and, in turn, lowers the overall tax liability.
This simple strategy is often overlooked and it sounds simple, right? It’s overlooked because either one part of a investment portfolios is run by one investment advisor. Another piece is run by another advisor. The problem arises when one side does not know what the other is doing. This leads to a mismatch in capital gains and losses resulting in more gains than intended. On the investment side, it may cause an investor or advisor from selling a particular stock because they do not want to incure a capital gains. This may lead to a stock being held longer than intended.
The to-do from this point is to estimate your capital gains in your taxable accounts towards the end of the year. Once that is known, start ‘harvesting losses by selling stocks at a loss to offset as much gain as your investment strategy will allow

Contribute the maximum to available retirement plans

Be sure to contribute as much as possible to the qualified retirement plans available through your employer or, if you are self-employed, to your retirement plans

Plan Ahead

Before year-end, estimate your total tax liability for the year. This can be done using a spreadsheet, tax software, or even draft tax forms, but the important thing is to develop a reasonable projection of your year-end tax bill.
Once you have that estimate, you can evaluate whether tax-loss harvesting makes sense and determine whether charitable contributions or other planning strategies may help reduce taxable income. We can address the specific techniques later; the key point is to estimate your tax liability while there is still time to act—ideally during the final quarter of the year.
Even better, as many of my clients do, maintain a running tax projection throughout the year. Start with a rough estimate in January and refine it as additional information becomes available. Planning early and updating the estimate regularly creates more opportunities to make informed, tax-efficient decisions.