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Tax day, (April 18th), for most of us has come and gone. D3 Financial Counselors’ staff completed 127 tax returns for our Affordable Family Office clients.  Preparing these returns provides us the opportunity to witness the impact of the tax strategies we recommend in our client’s financial plans. In other words, we get to see the value these strategies generate by observing first-hand how they actually impact our client’s taxes. Below are examples of how we integrated after-tax wealth maximization with financial planning and portfolio management.

Negative Income Tax Bracket:

This is a middle-income couple with 3 children and total income of nearly $100,000. They inherited some assets from their relatives. Using the inheritance to fund 2 IRAs, a health savings account, coupled with their exemptions and itemized deductions, we reduced their taxable income to approximately $45,000. With refundable child tax credits included, they actually had a negative income tax rate, meaning their refund exceeded the tax withheld from their pay checks.

High Income Earners:

This couple has W2 wages over $500,000. We were able to increase their deductions at the 35% marginal tax bracket by having them maximize their 401k plan contributions, maximize their HSA contributions, and contribute to a donor advised fund. Their $100,000 of combined deductions saved them $35,000 in taxes and will now help to fund their retirement, future health care costs, and future charitable giving.

Zero Tax Bracket:

This was for a retired, single, millionaire client living on the income from her assets, primarily invested in municipal bonds.  Her taxable income was completely eliminated by her itemized deductions and even though she was subject to the alternative minimum tax, because of the credit for alternative motor fuel vehicles she paid $0 in federal income tax in 2016.

6% Effective Tax Rate with $264,000 of Adjusted Gross Income:

This retired, executive couple generated $264,000 of adjusted gross income (AGI). $200,000 of the AGI was from long term capital gains based on our recommendation to reduce a concentrated stock position. Because of the special tax treatment afforded long term capital gains, their taxes were $16,900, giving them an effective tax rate was 5.69%.

Young Retired Corporate Executives Starting a New Business Venture:

A middle age couple with three children started semi-retirement in a dream location after benefiting from a lot of hard work and a liquidity event that provided them after-tax funds.  Both parents have started new business ventures that allow them the flexibility to spend time with their children. Their new businesses generated over $130,000 of total income. With solo 401k plans and a self-employed health insurance deduction, they reduced their adjusted gross income to $69,000. Ultimately with their itemized deductions they paid no federal income tax and were able to use a $2,000 child tax credit to offset their self-employment tax.

Retired Corporate Executive Creating Future Tax Flexibility at Zero Tax Cost Today:

This person is delaying taking Social Security and is living off investment income and his sizable savings account. We calculated that he could generate $20,000 in long term capital gains and still do a $21,000 Roth IRA conversion, generating about $65,000 of adjusted gross income.  Because the capital gains and qualified dividends were taxed at 0%, the Roth conversion only cost $377 in taxes.  He is building up his Roth IRA so he will have the ability in the future to control the tax consequence of where he withdraws funds after he starts taking Social Security and is forced to take required minimum distributions.


People often ask us how were we are able to come up with these strategies. The answer is very logical:  Good Long Term Planning.  We know our client’s goals (because we prepared our Affordable Family Office clients financial plans), and because all of our CFP® planners know taxes and prepare taxes (we only prepare taxes for our Affordable Family Office clients), we are able to design tax planning strategies to help our clients maximize their after-tax wealth. This is part of our Integrated Approach to Your Financial Future.

Call us at either 630-271-0033 or 312-526-3680 if you want us to generate this kind of value for you.