Broker Check
Don’t let tax filing eclipse your tax strategy

Don’t let tax filing eclipse your tax strategy

April 12, 2024

If you’re anything like the BFS Advisory Group team, you thought the solar eclipse was pretty awe-inspiring. From what we have heard in conversations with friends, family, colleagues, even someone at the gas station - the response to the experience of seeing the eclipse in the path of totality was universally and overwhelmingly positive. 

That was a welcome relief during the final week before the April 15 tax filing deadline, a nearly universally and overwhelmingly negative experience for most taxpayers. As you wrap up any last-minute details with your tax preparer, we’d like to turn your attention to your portfolio – for inside every portfolio is a tax strategy waiting to be unleashed. While the 2023 tax year is behind us, here are three of our favorite strategies that we are implementing for the 2024 tax year:

Identifying a Tax Desert: You will not find “tax desert” in the IRS rules and regs - it is the BFS Advisory Group proprietary process to look ahead into our clients’ financial futures to see where tax rates will vary significantly. With our sophisticated tax planning tools, we can take a complex financial future and design a strategy to incur specific types of taxation at advantageous times. This is especially useful for business owners selling their companies, corporate leaders with robust benefits packages, and high-income earners nearing retirement. You can learn more in our Guide for Small Business Owners.

Backdoor Roth – If you earn a high income ($161,000+ for single filers, $240,000+ for joint filers) but wish you could contribute to a Roth IRA, this strategy is for you. The short story is that you would fund a Traditional IRA account, then immediately convert to a Roth IRA. may wind up paying taxes on the contribution, but those dollars will grow tax-free until you withdraw them. The funds should stay invested for at least five years to avoid penalties, and the longer the better to allow tax-free growth to pile up as long as possible. This creates future tax diversification, a crucial element in building a portfolio that provides you with financial independence.

529-to-Roth Rollover – Since 529 Plans can only be used for education, we have had many families over the years hold back on maximizing contributions to these plans due to the unknowns of their child’s college path, and sometimes in expectation that college costs will stop rising. (As a parent with a senior in high school, I am keenly aware that inflation is not subsiding in higher education costs.) The 529-to-Roth Rollover allows a certain amount annually ($7,000 in 2024) and over a lifetime (currently $35,000) to be converted from a 529 Plan to your child’s Roth IRA if the funds are not used. To be clear, we are not yet implementing the actual rollovers. Instead, we are currently using this strategy to incentivize 529 plan contributions by reducing uncertainty around whether those dollars will be used well in a family’s long-term financial plan. 

Many investors (and some financial professionals) see investment portfolios as tax burdens, focusing only on the potential for capital gains and income taxes due down the road. We believe that tax strategies are in the eye of the beholder. Now that your 2023 taxes are behind you but still fresh on your mind, do your future self a favor and make sure you’re maximizing tax strategies for 2024. If you need help identifying how you can find tax opportunities in your portfolio, contact the BFS Advisory Group team at hello@bfsadvisorygroup.com.




Debra Brennan Tagg is a CERTIFIED FINANCIAL PLANNER™ Professional and the creator of the DBT360 Financial Plan, a proprietary program that helps her clients prioritize their goals, leverage their resources, and address their risks. She is the president of BFS Advisory Group and teaches the public and the financial services industry about the importance of values-based financial planning and investor education.