Tax Planning

Why Tax Planning Matters

Most people approach taxes reactively, working with an accountant each April to report what already happened. Tax planning is different. It's a year-round, forward-looking process that evaluates decisions before you make them. Should you accelerate income or defer it? When should you convert traditional retirement accounts to Roth? How should you structure charitable giving to maximize deductions? These questions require modeling different scenarios and understanding how today's choices affect your tax liability not just this year, but over the next decade or longer.

Working at the IRS gave me insight into how the tax code actually operates, not just in theory but in practice. I've seen how the rules work, where planning opportunities exist, and what strategies make sense. This experience helps me guide clients through complexity without unnecessary caution or recklessness; just thoughtful, data-driven recommendations tailored to your specific situation.

For high-income professionals and business owners in the DC metro area, tax planning becomes even more critical. Small missteps can cost thousands of dollars. The goal isn't to avoid taxes entirely but to structure your financial life so you pay what you owe and nothing more, while keeping more of what you earn working toward your long-term goals.

Who Can Benefit

Early-career professionals

The early years of your career offer unique tax planning opportunities that many people miss. While you're likely in a lower tax bracket now than you will be later, this is prime time to maximize Roth contributions and establish tax-efficient habits that compound over decades. Building your retirement savings in Roth accounts means tax-free growth and tax-free withdrawals later, when you're likely in a higher bracket.

Equity compensation is common in the DC tech corridor and among government contractors, but RSUs, ISOs, and ESPP plans each have different tax implications. Timing exercises and sales strategically can mean the difference between paying ordinary income rates or long-term capital gains rates. Many early-career professionals also overlook tax-loss harvesting, which should become routine, not an afterthought, especially if you're investing in taxable accounts alongside your 401(k).

If you're planning for children's education, 529 plans offer tax-deferred growth and tax-free withdrawals for qualified expenses. Maryland residents can also claim a state tax deduction of up to $2,500 per beneficiary per year. These decisions feel small now but have outsized impact over 10-20 years. Getting the foundation right early means you spend less time fixing mistakes later.

High-income earners

High-income earners face a different set of challenges: higher marginal tax rates, phase-outs of certain deductions, and the risk of triggering Medicare premium surcharges (IRMAA) that can add thousands to healthcare costs. For professionals and business owners in the DC area earning $200,000+ individually or $400,000+ as a couple, tax planning shifts from simple optimization to strategic necessity. Small decisions, like the timing of a bonus or poorly structured Roth conversions, can push you into higher brackets or trigger the 3.8% net investment income tax.

Backdoor Roth strategies become essential when your income exceeds direct Roth IRA contribution limits. This involves contributing to a traditional IRA and immediately converting it to Roth, but it requires careful coordination to avoid pro-rata taxation if you have other IRA balances. Charitable giving also deserves strategic attention. Bunching donations into donor-advised funds or using Qualified Charitable Distributions (QCDs) from IRAs after age 70½ can maximize deductions and reduce adjusted gross income.

For business owners, the tax code offers additional planning opportunities through retirement plan structures like Solo 401(k)s or SEP IRAs, which allow higher contribution limits than employee plans. Pass-through deductions under Section 199A can reduce taxable income by up to 20%, but the rules are complex and phase out at higher income levels. My experience at the IRS helps me navigate these rules confidently and structure strategies that hold up under scrutiny.

Retirees

Retirement introduces a new set of tax planning considerations, many of which require decisions that affect the rest of your financial life. The most visible is Required Minimum Distributions (RMDs), which force you to withdraw money from traditional retirement accounts. These withdrawals are taxed as ordinary income, and if not managed carefully, they can push you into higher brackets, trigger IRMAA surcharges on Medicare premiums, and increase the taxation of your Social Security benefits.

The years between retirement and when RMDs start in your 70s often represent the best opportunity for Roth conversions. If you retire before claiming Social Security, your taxable income may drop significantly, creating space to convert traditional IRA dollars to Roth at lower rates. This reduces future RMDs and creates a pool of tax-free income you can draw from later without affecting Medicare premiums or Social Security taxation. Timing matters: converting too much in one year can backfire, but spreading conversions strategically over several years can save tens of thousands in lifetime taxes.

Social Security claiming decisions also intersect with tax planning. Up to 85% of your Social Security benefits can be taxable depending on your other income, so the order in which you withdraw from different account types (taxable, tax-deferred, Roth) can materially affect your tax bill. Coordinating these decisions with Medicare enrollment, charitable giving through QCDs, and estate planning creates a complex web that benefits from integrated, forward-looking analysis rather than year-by-year reactivity.

How Tax Planning Integrates with Your Financial Plan

Tax planning doesn't exist in a vacuum. Every major financial decision you make has tax implications, and every tax strategy affects other parts of your financial plan. This is why I approach planning holistically rather than treating taxes, investments, and retirement as separate problems.

Investment management decisions depend heavily on tax considerations. Asset location strategies determine whether you hold bonds in taxable accounts or tax-deferred accounts, which can save thousands annually in unnecessary taxes. Rebalancing decisions need to account for potential capital gains, and tax-loss harvesting should be systematic, not opportunistic. These aren't just investment questions—they're tax questions disguised as investment questions.

Retirement timing decisions similarly require tax modeling. Should you retire at 62 or 65? When should you claim Social Security? How much should you convert to Roth before RMDs begin? These decisions interact in complex ways, and getting them right requires analyzing multiple scenarios across different time horizons. Drawing on my IRS background and experience as an economist, I model these tradeoffs so you can make informed decisions rather than guessing or relying on rules of thumb that may not apply to your situation.

This integrated approach is what distinguishes comprehensive financial planning from simple investment management or annual tax preparation. You can learn more about related services through Financial Planning, Retirement Planning, and Investment Management.

Next steps

Ready to reduce your lifetime tax burden? Schedule a free introductory call to discuss tax strategies tailored to your situation. You can also review fees and service options or visit the FAQ for answers to common questions about the planning process.