The Real Value of Tax Planning

What is the value of tax planning?


There has never been a more important time to have a tax plan. We are on the verge of what I call the 911 Biden tax attack. We have trillions of dollars in combined Stimulus Packages to pay for, a burgeoning national debt, and a massive reduction in both federal and state tax revenues.

The Real Value of Tax Planning

Here's what you can expect if you earn more than $200,000 and are single or more than $400,000 if you are married:

  • an increase in marginal rates of taxation to just under 40%

  • a 15.3% social security and Medicare surcharge

  • capital gain rates as high as 43%

  • a further phase-out of itemized deductions

In a worst-case scenario, a high-income earner’s incremental rate of taxation goes north of 55%, the highest it's been in decades, if not generations. Often, I get asked why tax planning is so important and what is the value of a tax plan?


Think about it. Taxes represent the largest outflow of cash in your financial life. Unfortunately, taxes are an item taken off the top and are simply a cost that many view as uncontrollable.


But there are a couple of key principles that make a huge difference in what you pay in taxes and ultimately how much wealth you accumulate and how quickly.



As professionals and business owners with high active income from our jobs or professions, we volunteer to pay tax only on the amount of cash flow we need to support our lifestyle. That income that's on the 1040 gets structured in the most tax-efficient manner. Every dollar of additional income that we earn gets moved into an environment where we have more control over how those dollars are taxed. That income gets moved off the 1040.


And here is probably the most important principle. During years when we have high active income, we structure our investments in a manner whereby the income does not get taxed currently, and either gets deferred into the future or eliminated entirely. This strategy increases our investment purchasing power and allows us to compound dollars that would normally be paid in income taxes.

Think about it. Taxes represent the largest outflow of cash in your financial life. Unfortunately, taxes are an item taken off the top and are simply a cost that many view as uncontrollable.

Successful implementation of this strategy amounts to hundreds, if not millions, of dollars of accumulated wealth at retirement, or at some point in the future when you become financially independent.


This concept is best illustrated by an example. Assume you invest $500,000 at an 18% rate of return, and your marginal rate of taxation is 35%. After year one with a tax strategy, you have an additional $31,000 in accumulated capital. This difference grows to just under $275,000 by year five. After a decade, you have more than 1.1 million dollars in an added investable capital. This strategy evolves over years, possibly decades, until we decide to scale back our active income and begin living off of passive income. During these later years, we can bring capital out at a much lower margin rate of taxation and increase the amount of monthly disposable income you have and make that capital last much longer in your life.

There has never been a more important time to have a tax strategy.

Take the time, schedule a consultation, allow us to do what we have been doing successfully for decades. Call 817.912.1569 to schedule an appointment with us or attend a local event and start building your own customized strategy. Use the link below to to schedule an appointment today.




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