An important trend in the financial world is the growing demand for skilled Certified Public Accountants (CPAs). As your financial advisor, I am always looking for ways to improve our services. Recently, I've noticed that many of the excellent CPAs we work with are reaching capacity with clients. This presents both a challenge and an opportunity for us.
Why does this matter to you?
- Quality tax advice is crucial for financial success.
- The best CPAs do more than just prepare taxes - they offer strategic planning.
- Having a CPA who collaborates with your financial advisor can lead to optimal decision making which can save a meaningful amount in taxes over your lifetime.
Let's talk about taxes and retirement planning. Many people don't fully grasp how tax brackets work. For married couples filing jointly in 2024, here's a breakdown:
- $0 to $23,200: 10%
- $23,201 to $94,300: 12%
- $94,301 to $201,050: 22%
- $201,051 to $383,900: 24%
- $383,901 to $487,450: 32%
- $487,451 to $731,200: 35%
- $731,201 or more: 37%
Let's break down the tax brackets for married couples filing jointly in 2024. The standard deduction is $29,200. The 10% tax bracket applies to taxable income up to $23,200, while the 12% tax bracket covers taxable income from $23,201 to $94,300.
This means a couple with $81,600 in total income ($52,400 taxable after the standard deduction) would owe $5,824 in taxes. That's an effective tax rate of 11.11% on their taxable income. Similarly, a couple with $152,700 in total income ($123,500 taxable after the standard deduction) would owe $17,276 in taxes. Their effective tax rate would be 13.99% on their taxable income.
This is where a skilled CPA becomes invaluable. They can help you target specific tax rates by coordinating with your financial advisor to tactically withdraw from different types of accounts. For example:
- They might suggest taking just enough from your IRA to fill up the 12% bracket.
- Then, they could advise using Roth funds for additional income, since these withdrawals are typically tax-free.
- Or they might recommend tapping non-qualified accounts for their potentially favorable capital gains treatment.
The goal? To keep you in lower tax brackets while meeting your income needs. This strategy, tailored to your unique circumstances, could save you tens of thousands (if not more) in taxes over your retirement years.
A good CPA doesn't just follow rules of thumb about which accounts to draw from first - non-qualified accounts, 401(k), IRA, or Roth. They create effective strategies for your specific situation, understanding the interplay between different account types and marginal tax brackets. This kind of planning can make a huge difference in your tax liability and net cash flow.
At Certus, we're always striving to expand our network of skilled professionals. We're looking to connect with more top-tier CPAs to ensure we can continue to provide comprehensive financial services to all our clients. For more about how clients benefit from advisory coordination, click here.
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If you're working with a CPA you know and trust, we'd love to hear about them. Your recommendation could help us serve you and our other clients even better. Please send their contact information to info@certuswealthmanagement.com.
As always, I'm here to answer any questions you might have about this or any other financial matter.
This content is provided for educational purposes only, represents only a summary of topics discussed, does not constitute any personalized investment advice or recommendation, and represents only the views and opinions of the speakers which are subject to change without notice. Investing involves risk including the potential loss of all amounts invested.
This material prepared by Certus Wealth Management, LLC (“Certus Wealth”) is for informational purposes only. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy or investment product. Opinions expressed by Certus Wealth are based on economic or market conditions at the time this material was written. Economies and markets fluctuate. Actual economic or market events may turn out differently than anticipated. Facts presented have been obtained from sources believed to be reliable. Certus Wealth, however, cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Certus Wealth does not provide tax or legal advice, and nothing contained in these materials should be taken as tax or legal advice.
