Taxes
Taxes have a huge impact on your income and assets. Did you know that a typical couple making $300,000 annually can expect to pay about 35% ($96,000-$111,000) per year in total taxes? This combines federal and state income taxes, payroll taxes, sales taxes, property taxes and other taxes. Are you tax-efficient? Would you like to know?
Individual Income Taxes
Do you (or does someone else) prepare quarterly income tax projections for you? We believe regular quarterly projections are critical for keeping taxes to a minimum. First, they avoid surprises like unexpected bills or penalties. Second, you can make smarter decisions about possible transactions, allowing you to develop strategies and solutions to reduce taxes.
The new tax bill signed into law on 7/4/2025 made permanent many provisions from the 2017 Tax Cuts and Jobs Act. It also provided some major changes for individuals and businesses taking effect primarily in the 2025 tax year. Do you know what changes impact you and can save you money? DWM clients know.
Here are some examples of key tax-saving strategies that we often use for clients:
Roth Conversions
The concept behind a Roth conversion is “pay the tax once and the money grows tax-free forever.” The most opportune time to do this is before RMDs start – even better before social security payments start. Through custom tailored Roth conversions, we have helped our clients save hundreds of thousands of tax dollars while increasing their financial legacies by millions of dollars using Roths. Of course, every situation is different.
Back-Door Roths
These are specifically suited for high-income taxpayers seeking Roth advantages. Generally it is necessary first to roll over pre-tax IRA balances to a company retirement plan. Then non-deductible IRA contributions are made (currently $7,000/$8,000), and those funds are converted to a Roth IRA. This is the “backdoor” into Roth status and the advantages of tax-free growth and withdrawals.
Donor Advised Funds
For those clients who are philanthropic and want or need to get immediate tax benefits, we suggest Donor Advised Funds (DAFs). Clients make a contribution to a Charitable Fund and get an immediate tax deduction for the value contributed. Assets contributed to the DAF can be invested and grow tax-free, increasing the charitable impact. Donors can eliminate capital gains taxes on appreciated assets and contribute them to a DAF at current fair market value. Donors get to decide how and when the grants are made, giving them flexibility and control over their philanthropy.
Health Savings Accounts
Contributing to HSAs can be a “triple play”: deductible contributions, tax-free growth, and tax-free withdrawals for certain expenses. For clients who qualify, an HSA can work like a supplemental IRA, but with the added feature than if the proceeds are used for expenses (such as certain Long-Term Care), the distributions are not taxable.
Business Income Taxes
As a business owner, do you know the impact of the new tax bill on your business? You may be able to take advantage of huge opportunities in Research and Development credits and deductions in 2025 (as well as 2022-2024), as well as 100% expensing of equipment purchases, certain real estate used in manufacturing, and other items. DWM business clients know all this.
As a business owner, do you have quarterly meetings with your CPA and your informed wealth manager? If not, you should consider it. Top wealth managers, like DWM, know taxes; they know your business, and they know your personal finances. This allows the more diligent and creative managers to provide key strategies and solutions to save you income taxes – sometimes in a big way.
Client Stories
Cash Basis Provides Big Tax Deferrals
Prior to 2018, the maximum annual revenue a business could have (and use as the cash basis of accounting) was $10 million. Starting in 2018, that maximum was moved up to $25 million, increasing with inflation. Three of our business clients benefited greatly when DWM identified situations where each could change to a cash basis and defer millions of tax dollars.
Switching From C to S Worked Well!
One of our new DWM business clients had a very profitable company running as a C-Corporation, primarily because their CPA liked having the company’s fiscal year-end in March. We suggested the company switch to an S Corporation which currently eliminates double taxation. This strategy saved them hundreds of thousands of dollars in income taxes and will continue to do so. And, if the business is sold in four or more years, it will save millions in taxes on the sale.