Strategies for Effective Tax Planning

Tax planning may not be the most exciting part of creating a financial plan. But if you want to keep more of your money in your pocket, active tax management is critical.

For instance, let’s say you’re planning on selling your business. While negotiating a good price is important, so is structuring a tax-efficient way to receive the proceeds. Investing these assets strategically post-sale can, in turn, help minimize taxes as you draw down the funds over the years.

At SWP, we believe that active tax management should play a central role in any financial plan. In this article, we’ll outline the key strategies involved in implementing appropriate and effective tax management.

Choosing the Right Tax Resources

For many people, tax management is something to think about once a year in April. But by assembling the right resources, you can ensure tax planning is integrated into your wealth strategy on an ongoing basis.

Given the depth of the topic, we believe that working with a team of professionals is the best way to effectively manage potential tax liabilities. At the core of that team should be a trusted CPA who can advise you on all tax-related matters.

Meanwhile, your wealth advisor should coordinate with your CPA to ensure your taxes are considered holistically – including both income and investments. A wealth manager can leverage best-in-class financial planning software to gain even more insight into your tax plan. Examples of software include, but are not limited to Holistiplan, for reviewing old tax returns and identifying strategies for tax bracket management, and eMoney, for tax-efficient cash flow planning. While the software is no replacement for a team of real advisors, these advanced planning tools can help uncover opportunities for improving your tax situation that might otherwise be overlooked.

In fact, one area where tax opportunities are often overlooked is your investment portfolio.

Portfolio Strategies to Effectively Manage Taxes

When it comes to evaluating investment results, annualized pre-tax returns are just one part of the performance equation. While these returns tend to be the headline figures, taxes can play a significant role in determining realized (or “take-home”) investment performance. Therefore, portfolio construction should take place with tax optimization in mind.

For example, the type of investment vehicles you choose will impact your overall tax picture. When choosing between similar ETFs and mutual funds, you may want to opt for ETFs. These vehicles tend to be more tax efficient as they may not be subject to capital gains distributions.

Direct indexing, which involves replicating an index with individual positions in an investment account, can also be a beneficial allocation decision. Direct indexing allows you to harvest losses on individual securities. These realized losses are, in turn, passed through to you and your tax return.

But investment allocation isn’t the only factor. Investment location, referring to the type of account into which each investment is placed, matters too. For instance, investments that distribute substantial amounts of ordinary income may be best kept in tax-deferred accounts. Tax-efficient investments, like the ETFs described above, can populate regular taxable accounts.

Using these taxable accounts effectively can be another tool in your tax strategy. In taxable accounts, you can take advantage of tax-loss harvesting, which involves selling a losing position to realize a loss. This loss can offset other income for the year, up to a limit. You can avoid materially affecting portfolio allocation with these sales by purchasing similar (but not identical) positions.

 Charitable Giving: Doing Well by Doing Good

Just like your investment strategy, your philanthropic strategy should be developed with taxes in mind. At SWP, we believe in the importance of giving back – but we also believe in the importance of doing it with tax efficiency in mind.

If you’ve had a high-income year, for instance, you can time your charitable giving to match. If you were already planning on giving, this is an excellent opportunity to lower your tax burden. While giving directly is an option, there are other strategies available that preserve some flexibility.

A donor-advised fund (DAF), for example, is a way to take an immediate tax deduction on your charitable giving while retaining flexibility over where the funds will ultimately go. By contributing to a DAF, you can deduct the full amount of your gift today, but the money is held in the fund until you’re ready to disburse it to charity. This structure could be a good option if you know you want to give to charity but can’t decide on an organization right now.

Charitable giving can also help fully utilize the value of highly appreciated assets. If you sell an asset and gift the cash proceeds, you’d have to pay taxes on the gain from the sale. But, by donating the asset to a charitable cause without selling, you incur no capital gains taxes while still receiving the income tax deduction. This strategy also helps you maximize your donation size since you don’t have to give up a portion of the asset’s value in capital gains taxes first.

Closing Thoughts

As outlined in this article, active tax management is a crucial part of your wealth strategy. A thoughtful team of professionals can help structure your finances appropriately, keeping more money in your pocket and helping you use your resources as efficiently as possible.

At SWP, we aim to be a key player on our clients’ tax team. With our background and experience in optimizing investment taxes, we coordinate with our clients’ CPAs and other advisors to help create a holistic tax plan.

If you’d like to discuss how your investment plan can be used as a tool to improve your tax situation, we invite you to reach out to our team today.


The information herein was obtained from third party resources that SWP deems to be reliable as of the original date of publication. SWP does not have affiliation with Holistiplan or eMoney.


This article contains general information that is not suitable for everyone. The information contained herein should not be constructed as personalized investment advice. Reading or utilizing this information does not create an advisory relationship. An advisory relationship can be established only after the following two events have been completed (1) our thorough review with you of all the relevant facts pertaining to a potential engagement; and (2) the execution of a Client Advisory Agreement. There is no guarantee that the views and opinions expressed in this article will come to pass. Investing in the stock market involves gains and losses and may not be suitable for all investors. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security.

Strategic Wealth Partners (‘SWP’) is an SEC registered investment advisor with its principal place of business in the State of Illinois. The brochure is limited to the dissemination of general information pertaining to its investment advisory services, views on the market, and investment philosophy. Any subsequent, direct communication by SWP with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of SWP, please contact SWP or refer to the Investment Advisor Public Disclosure website (

For additional information about SWP, including fees and services, send for our disclosure brochure as set forth on Form ADV from SWP using the contact information herein. Please read the disclosure brochure carefully before you invest or send money (

Ignoring the Noise and Staying the Course:  A Recipe for Success
In today’s fast-paced world, it's easy to get caught up in the noise of predictions, forecasts, and market speculation. It's tempting to listen and react to predictions, but successful investing and sound financial planning involve tuning out the noise and taking a more disciplined, strategic approach.
Read More
Financial Planning
Nurturing Wealth Across Generations: A Guide to Multi-Generational Wealth Planning
Often referred to as the “Great Wealth Transfer,” studies show that roughly $84 trillion in assets amassed by baby boomers will change hands over the next 20 years. When examined more closely, a third of today’s high-net-worth individuals inherited their wealth.  According to the UBS Billionaire Ambitions Report, in 2023, more new billionaires were created by inherited wealth rather than entrepreneurship. This trend looks to continue in the years to come for many wealthy families (not just billionaires).
Read More
Financial Planning
The Benefits of Being a Co-Trustee on Your Parents or Loved Ones Accounts
As we watch our parents (or any other loved one) make that gradual shift from being totally independent to needing help, there are some steps that can be taken to facilitate family involvement.  Even for those of us who have parents who are 100% capable of managing their affairs, it doesn’t hurt to be prepared for an unexpected circumstance. The most common solution for being able to manage our parent’s accounts on their behalf is to have an attorney draft a Power of Attorney (“POA”).  A POA is a legal document that authorizes a person to act on another person’s behalf.  We highly recommend them for everyone 18 years and over, so they can have someone act on their behalf when they are no longer able to make financial or health care decisions.   It creates a fiduciary relationship between the Principal (person who created the document) and the Agent (person named to carry out the instructions).  This is my non-attorney understanding of how it works. 
Read More