Date: Apr 28TH, 2023

Do Your Financial Advisors and Tax Professionals Work Together? They Should. Here’s Why.

Today, many investors tap into the wisdom of financial advisors to guide them on a properly balanced portfolio with the right mix of financial products to yield the kind of results the investors need depending on their stage of life. At the same time, most of these same investors employ the services of a tax professional to ensure their taxes are completed properly and to their best advantage. Often, however, these two entities work separately from one another.

There are advantages to having financial advisors work with tax professionals. Specifically, a combination approach can help in several ways, including:

Taxed Versus Tax-Free Investments. There is no single answer as to whether taxed investments will work better for you than tax-free investments: it depends on your portfolio, your goals and your stage of life. By encouraging your financial advisor and tax professional to work together, you can get a better picture of where it’s better to allocate your resources and investments. If you’re post-retirement, you’ll want the two entities to coordinate to determine how much of your social security income is taxable.

Owning Versus Renting Real Estate. The adage that owning is better than renting is somewhat old-fashioned and may not be true for everyone. Mortgage interest and real estate taxes are tax deductible expenses, but rent is not. How valuable deducting mortgage interest will be for you will be determined by many factors: your taxable income, your tax rate, and whether you use the standard deduction or itemize. With your tax advisor’s guidance, your financial advisor will be better positioned to recommend the best course of action for you, and vice-versa.

Estate Planning. Chances are good you’re hoping to maximize the value of the estate that you leave to your heirs, and you’d like to minimize the tax burden on them. Even if your estate is large, you can leave a significant amount to your heirs and pay no federal estate or gift tax, if the estate planning is handled properly.

Determining how much life insurance you need. To arrive at the proper amount of life insurance for your situation, your financial adviser and tax professional should ideally be working together to arrive at a ballpark figure for the expected size of your estate, your estimated federal estate tax liability and any applicable state estate taxes.

When to Take Losses and Gains. In an unpredictable market environment, it can be hard to know when to strategically wield your losses to your benefit. Capital losses can be used to offset capital gains or up to $3,000 of ordinary income per year. A team of money professionals can determine the best time to take losses that will offset your tax burden.

Consult with Professionals

Learn how Arizona-based Prime Wealth Advisors’ full-service retirement planning, tax, estate, and wealth management can help you ensure your investment funds will last for your lifetime and beyond. Call 623.77.PRIME for more information.