Insights You Can Learn From Your Tax Return

In this video, we explore how your annual tax return can be more than just a set of numbers. Learn how to use the insights from your tax return to build a strategy that reduces your tax bill over your lifetime.

Your annual tax return isn’t just a formality – it’s a window into opportunities to reduce your lifetime tax bill. We’re diving into how your tax return can be more than just numbers – it can guide your financial strategy.

If you got a tax refund this year, you’ve essentially given Uncle Sam an interest-free loan. If you owed taxes, it’s also probably time to reevaluate your withholding or estimated tax payments. Either way, your goal should be to manage your money effectively throughout the year, not just during tax season.

It’s also important to talk about your effective tax rate versus your marginal tax rate. Your effective tax rate is the percentage of your total income that went to taxes, while your marginal rate applies to your last dollar earned. Knowing this difference helps you understand how much of your income is really being taxed at higher rates. Understanding how deductions and credits affect your effective tax rate is really important too. In essence, we want to reduce your lifetime effective tax rate – not just year to year.

Even with help from your accountant, mistakes can happen. That’s why it’s crucial to double-check your tax return – especially for overlooked transactions like Qualified Charitable Distributions. A second set of eyes can help catch errors before they become costly. Your accountant will need information beyond just your tax forms to know what certain account distributions are.

Analyzing your tax return can reveal ways to optimize your tax strategy. Consider opportunities like Roth conversions or tax-gain harvesting. These strategies may help you front-load taxes now to reduce your taxes later when you’re most vulnerable in retirement.

Reviewing deductions and credits can help you plan better for the future. If you’re close to the income threshold for a valuable credit, you might consider shifting some income to stay below that limit. Make sure you’re maximizing your tax-advantaged accounts like retirement accounts and college savings plans too. These accounts can help you reduce your tax burden year by year and achieve your financial goals more efficiently. By zooming out and considering your entire financial picture, you can make decisions today that will benefit you for years to come.

Every decision you make today has a ripple effect on your future taxes. Roth conversions, Required Minimum Distributions, and charitable giving all impact your financial strategy over time. At NextGen Wealth, we don’t just analyze your tax returns – we integrate them into your personalized financial plan. Then, we track and monitor your financial life to make sure things go as smoothly as possible.

Our goal is to help you make informed decisions to optimize your retirement and minimize taxes. Don’t let tax season pass you by without using it to your advantage.

Are you ready to take control of your retirement? Contact us today to see if we’re a good fit and schedule your free financial assessment. Don't leave your retirement to chance. Let's make sure you're on the right track.

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