TAX PLANNING

Our financial advisor creates tax-efficient strategies for businesses and individuals in Lincolnwood, Chicago, and beyond so that you can keep more of your hard-earned money.

Staying aware of changes in state, federal, corporate, and other taxes is a critical, and massive undertaking. At Armor Wealth Group, we understand that taxes impact every aspect of your financial life. We find that many people confuse tax preparation and tax planning.

Tax preparation deals with reporting numbers that have already happened on the relevant tax forms, whereas tax planning is an ongoing process that looks at your current and anticipated circumstances to develop strategies to more tax efficiently arrange your affairs both now and in the future.

Tax planning can be powerful and today’s environment makes it even more important. Our clients receive proactive advice on a wide variety of tax efficient strategies based on their individual circumstances and goals. What do tax rates look like now? Which account should take withdrawals from first? How does your retirement income affect your Medicare premium? How is Social Security income taxed? Should I exercise my employee stock options now or wait?

We can help you understand how your decisions today can impact your taxes now and in the future. When working with us, be assured that the decisions we make on your behalf take into consideration any potential tax implications.

View our tax planning resources here.

As a financial advisor, I understand that effective tax planning and mitigation are crucial for optimizing your financial health. Here’s a comprehensive look at strategies tailored for both businesses and individuals:

For Businesses

Entity Selection

Choosing the right business structure (LLC, S-Corp, C-Corp) can significantly impact your tax liabilities. Each entity type has different tax implications, and selecting the most advantageous one can lead to substantial savings.

Expense Deductions

Maximizing deductible business expenses, such as office supplies, travel, and employee benefits, can reduce taxable income. Keeping detailed records and receipts is essential for claiming these deductions.

Depreciation Strategies

Utilizing accelerated depreciation methods for assets can provide immediate tax relief. Section 179 and bonus depreciation allow businesses to deduct a larger portion of the asset’s cost in the year of purchase.

Tax Credits

Taking advantage of available tax credits, such as the Research & Development (R&D) credit, can directly reduce your tax bill. These credits are often underutilized but can provide significant savings.

Retirement Plans

Establishing retirement plans like SEP IRAs or 401(k)s for employees can offer tax benefits. Contributions to these plans are tax-deductible, reducing the business’s taxable income.

For Individuals

Retirement Contributions

Contributing to retirement accounts like IRAs and 401(k)s can lower your taxable income. Traditional IRAs offer tax-deferred growth, while Roth IRAs provide tax-free withdrawals in retirement.

Tax-Efficient Investments

Investing in tax-efficient vehicles, such as municipal bonds or index funds, can minimize tax liabilities. Municipal bonds are often exempt from federal and state taxes, while index funds typically generate fewer taxable events.

Charitable Contributions

Donating to qualified charities can provide tax deductions. Consider donating appreciated assets instead of cash to avoid capital gains taxes and receive a deduction for the asset’s fair market value.

Health Savings Accounts (HSAs)

HSAs offer triple tax benefits: contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free. They are an excellent tool for managing healthcare costs and reducing taxable income.

Tax-Loss Harvesting

Selling investments at a loss to offset gains can reduce your taxable income. This strategy can be particularly effective in volatile markets, allowing you to manage your tax liabilities proactively.

Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax. A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply. Municipal bonds are subject to availability and change in price. They are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. Interest income may be subject to the alternative minimum tax. Municipal bonds are federally tax-free but other state and local taxes may apply. If sold prior to maturity, capital gains tax could apply. ETFs trade like stocks, are subject to investment risk, fluctuate in market value, and may trade at prices above or below the ETF's net asset value (NAV). Upon redemption, the value of fund shares may be worth more or less than their original cost. ETFs carry additional risks such as not being diversified, possible trading halts, and index tracking errors.

Proactive Tax Planning

Regular Reviews

Conducting regular reviews of your financial situation and tax strategies ensures you are taking advantage of all available opportunities. Tax laws change frequently, and staying informed is key to effective planning.

Future Planning

Considering future events, such as retirement, education expenses, or major purchases, allows for strategic planning. Understanding how these events impact your tax situation helps in making informed decisions.

Professional Advice

Working with a financial advisor or tax professional can provide personalized strategies tailored to your unique circumstances. They can help navigate complex tax laws and identify opportunities for savings.

By implementing these strategies, businesses and individuals can effectively manage their tax liabilities and enhance their financial well-being. Remember, proactive tax planning is an ongoing process that requires regular attention and adjustment to align with your evolving financial goals.

Armor Wealth Group and LPL Financial do not offer tax advice or services.