Understanding the key elements of tax planning with a financial advisor can help you minimize tax liability and build a tax planning strategy that aligns with your long-term financial goals.
by Karl Schwartz | Feb 20, 2025 | Tax Planning, Smart Financial Tips
Key points
- A comprehensive plan aligns your tax approach with your overall wealth management strategy.
- Tax-smart investing is a key component to enhance your bottom line.
- Like any good plan, yours should be adaptable to the evolving tax landscape and changes in your personal financial situation.
When it comes to wealth management tax strategies, taxes often don’t receive as much attention as investments — but their role in your financial security is just as important. By partnering with a financial advisor with tax planning experience, you can reduce your tax liability and implement tax planning strategies that support your long-term financial goals.
So, how can you effectively collaborate with your financial advisor on tax planning?
In this blog, we’ll cover the five essential elements of tax planning that can help you minimize your tax liability and support your ultimate financial goals. Whether you’re exploring tax planning options or searching for the top-rated wealth management tax strategies, these insights will guide you toward efficient tax and financial services.
What is tax planning?
At its heart, tax planning means developing a strategy that minimizes your tax liability — i.e. reduces the amount you owe in taxes — based on your unique financial circumstances. Tax planning with an advisor can include many different tactics, such as making use of tax deductions and credits, deferring income, or allocating money to accounts that offer tax advantages, like 529 plans, Health Savings Accounts, or Roth 401k’s/IRAs.
Tax preparing, on the other hand, refers to actually filling out and submitting your tax returns, which is typically done either independently or with the help of a tax preparer.
What are the essentials of tax planning?
When developing your tax strategy, make sure that the advisor you are working with incorporates the following essentials into their process:
- A holistic review
- Tax-efficient investments
- Staying on top of updates
- Evolution and adaptation
- Ongoing support at no extra cost
Read on for more details on each of these elements.
1. A Holistic Review
Many different facets of your personal finances carry tax implications, from investments to employee stock options to property holdings and more — so it only makes sense to create a tax strategy that takes all of these elements into account. A good financial advisor will take a comprehensive look at your finances in order to create a sound, integrated strategy.
This is one of the biggest differences between tax preparation and tax planning with an advisor. While tax preparers focus on the tactical elements of taxes — such as reporting income, tracking expenses, and disclosing the value of certain assets — financial advisors take a bird’s eye view to make sure that your approach to taxes aligns with your overall wealth management strategy.
By looking at not only your income and expenses, but also your investment portfolio, estate planning, and charitable giving (among many others), your financial advisor uses tax planning as one tool to reach your overall financial goals — whether that means buying a second home, saving for your children’s college tuition, or preparing for retirement.
2. Tax-Efficient Investments
A lot of people think of a good investment as the one that makes the most money — but this is only part of the picture. It’s very possible for an investment to have a higher value but ultimately put less money in your pocket due to the unfavorable way it’s taxed. The best financial advisors, however, will take tax-efficient investing into account when assessing your portfolio and making recommendations. A few tax-efficient investment strategies may include:
- Tax-loss harvesting
- Tax-efficient withdrawals
- Utilization of tax-efficient investment vehicles
- Spreading investments across a variety of accounts with different taxability
Using strategies like these and others, your financial advisor can help ensure that your investments don’t just look good on paper, but also build your wealth in the most efficient way possible.
3. Staying on Top of Updates
People usually don’t think of taxes as the most dynamic field — but the truth is, the rules and regulations surrounding them are constantly evolving. Things like IRA contribution limits and the exact value of credits and deductions typically update on a yearly basis, but there are also frequent changes to tax laws at the local, state, and federal levels. These developments can have significant tax implications in both the short and long term, so it’s critical that your financial advisor stays in the know.
At Team Hewins, our finance professionals are constantly monitoring things like available tax deductions, charitable gifting strategies, and any potential tax changes that may affect our clients; allowing them to have the most up-to-date insight into the tax landscape.
4. Evolution & Adaptation
Being aware of changes, of course, is just half of the equation — the other half is adapting to them. The best financial advisers will analyze the updates that take place to tax law, your personal financial circumstances, and the overall market, and make recommendations accordingly. That way, your financial tax planning strategy will be optimized for any given moment.
Let’s say, for example, that your income increases significantly from one year to another. Your financial advisor may discover that you would benefit from creating a formal charitable gifting strategy, whether that’s via appreciated stock, a Qualified Charitable Distribution (QCD), or a Donor Advised Fund (DAF).
Or maybe your retirement is approaching — in some cases, it may be beneficial to convert some (or all) of your traditional retirement plan funds into a Roth IRA. While withdrawals from traditional retirement accounts are typically taxable, this strategy might just reduce the amount you pay in taxes overall.
Whatever your personal situation, taking a dynamic, proactive approach will offer you the peace of mind that comes with a sound financial future.
5. Ongoing Support (at No Extra Cost)
The smartest tax plans aren’t just the result of a one-time consultation, but rather an ongoing partnership. You should feel free to reach out to your financial planner for tax planning advice, whether you have a question, update, or just want to make sure you’re still aligned and on track. If you work with one of the many tax or finance professionals who operate on an hourly fee, however, these check-ins can quickly add up and exceed the budget that you had in mind.
At Team Hewins, our quarterly fee covers all services, including tax planning. So go ahead — ask questions, seek advice, and run through any what-if scenarios you have on your mind, without worrying about racking up extra fees. Doing so will give us the information we need to be successful while providing you with reassurance that your finances are in good shape.
Find financial success with tax planning
If this isn’t already part of your wealth management strategy, there’s no time to take action like the present. The professionals at Team Hewins can work with you to create a strategy that incorporates all of the essentials of tax planning — and more.
With a smart, comprehensive tax plan that is monitored and adjusted over time, you can feel confident about reaching the financial milestones that matter to you the most. Reach out today to learn more about how we can help!
Team Hewins, LLC (“Team Hewins”) is an SEC-registered investment adviser; however, such registration does not imply a certain level of skill or training, and no inference to the contrary should be made. We provide this information with the understanding that we are not engaged in rendering legal, accounting, or tax services. We recommend that all investors seek out the services of competent professionals in any of the aforementioned areas. Certain information provided herein is based on third-party sources, which information, although believed to be accurate, has not been independently verified by Team Hewins. Team Hewins assumes no liability for errors and omissions in the information contained herein. Certain information contained herein constitutes forward-looking statements. Team Hewins does not guarantee the achievement of long-term goals in the portfolio review process. Past performance is no guarantee of future results, and a diversified portfolio does not guarantee a positive outcome. Nothing contained herein may be relied upon as a guarantee, promise, assurance, or a representation as to the future.