Financial Matters: Financial Planning

PORTSMOUTH, Va. (WVBT) - We are talking about the role of taxes in financial planning.

Stephanie Bard with BayPort Financial tells us how.

Four ways to address tax issues:
· Tax efficient (match gain with losses)
· Tax deferred (Traditional IRA, annuities)
· Tax deductible (Deductible Traditional IRA, 529 college savings plan)
· Tax free (Roth, Municipal Bonds)

1. Tax efficient

-Tax Harvesting
i. Match gains with losses
ii. An efficient way is through a separate managed account

2. Tax Deferred
-Traditional IRA
i. Taxes are deferred until distribution

3. Annuities
i. IRA or non IRA
ii. IRA: follows rules of Traditional IRA
iii. Non-IRA: taxes are deferred on growth until distribution

4. Tax Deductible
Deductible Traditional IRA
i. Reduces income by contribution

5. 529 College Plan
i. A Virginia resident may deduct contributions of up to $4,000 from state taxable income.
ii. If more than $4,000 is contributed, remainder may be carried forward

6. Tax Free
Roth IRAs
i. Non- deductible contributions
ii. Tax free distributions, if all rules are followed
 

7. Municipal Bonds
i. Tax-free interest
1. Unless hit alternative minimum tax limit (AMT)
a. Cannot derive 100% of income from muni bonds without being taxed.

For more information, click here .