It’s amazing how difficult simple things can be. Take, for instance, this newsletter on financial planning for individuals and business owners. For me, it’s next to impossible to sit down and write it. Am I being graded? Are there any significant consequences if my readers don’t like the words I write down? No, the worst that happens is an “unsubscribe.” But it’s so easy to become paralyzed by overanalyzing every aspect and caveat.
As a Harrisonburg financial advisor, I’ve found that we as humans have a phenomenal ability to make simple things complex. The content of this newsletter today, if you’d ask me in person, could provide countless hours of my rambling, but putting pen to paper makes me feel like I’m in my Ethics 101 class at Bridgewater College with the professor asking me a question I have no answer to. Maybe you can relate to that in some small way.
So, in the spirit of keeping simple things simple, I’ve developed a list of core questions I help each of my financial planning clients answer to create clarity and direction:
- Am I being as tax-efficient as I can be?
- Am I keeping as many dollars in my pocket as I can?
- Is my investment portfolio aligned with my personal values?
- Is the uncertainty of my future planned for?
Why Tax Efficiency Matters in Financial Planning
Today, we’ll dive into tax efficiency, one of the foundational financial planning principles we use at Glenn Financial. This principle is part of our “Think On It” process and is best summed up by the phrase: We control the things we can control.
Tax efficiency isn’t about loopholes—it’s about applying smart tax strategies based on your current situation. To illustrate, here are two stories from real clients.
Case Study #1: Missed Tax Deduction Cost This Business Owner $26,839
Recently, a small business owner came to us for a tax analysis and financial review. He was already paying another company to keep his books, but wasn’t sure if he was being as tax efficient as possible. Turns out, he wasn’t.
The problem? His accountant failed to apply the Qualified Business Income Deduction (QBID)—a tax break that can deduct up to 20% of qualified income. Because of this oversight, he had overpaid $26,839 in taxes, which we helped him recover through amended tax returns.
Key Takeaways for Business Owners:
- Tax planning starts with accurate records.
- Don’t blindly trust tax software—mistakes happen.
- Understand deductions like the QBI deduction (IRS Pub 199A).
If you’re a small business owner or entrepreneur, it’s worth asking: Is your current tax strategy leaving money on the table?
Case Study #2: A Better Approach for Retirement Tax Planning
Ted and Sharon, clients in their mid-to-late 50s, were preparing for retirement. After Ted inherited $1 million, they placed it in a certificate of deposit (CD) earning 5%. While the interest income looked attractive, they didn’t consider the tax impact of CDs.
- Interest income: $50,000
- Taxed at 22% = $11,000
- Net return: $39,000 (or $37,830 after inflation)
That’s a significant drop from the advertised yield. We moved those funds into a diversified investment portfolio tailored for long-term growth.
- Annual yield: $18,700
- $11,220 in interest (taxed at 22%)
- $7,480 in qualified dividends (taxed at 15%)
- Total taxes owed: $2,767
- Tax savings: $8,233
Tax Strategy Benefits:
- Used capital gains rates for lower tax liability
- Optimized asset location within the portfolio
- Increased the client’s likelihood of reaching retirement goals
Whether you have $100K or $1M, the same investment tax strategies apply. The only difference is how much you can potentially save.
What You Can Do Right Now
- Understand Tax Location:
- Interest is taxed at your highest marginal rate.
- Qualified dividends and long-term capital gains are taxed more favorably.
- Choose the Right Investments for Your Goals:
- Short-term = savings account or CD
- Long-term = tax-efficient investment portfolios
- Maximize Tax-Advantaged Accounts:
- Employer retirement plans (401(k), SIMPLE IRA)
- Roth IRAs and Traditional IRAs
- Health Savings Accounts (HSAs) for healthcare savings
Let’s Simplify Your Financial Plan
At Glenn Financial, our goal is to help clients in Harrisonburg and beyond make wise, values-based financial decisions. Through our complimentary “Think On It” process, we provide clarity, confidence, and real value before a fee is even paid.
We specialize in:
- Tax-efficient investment planning
- Financial planning for retirement
- Wealth strategies for small business owners
- Values-based financial advice
- Biblical financial stewardship
Whether you’re a retiree, business owner, or just trying to keep more of what you earn, we can help you align your financial life with what matters most to you.
Ready to See if You’re Missing Tax Savings?
Schedule a free introductory call. No pressure—just answers.
📍 Serving the Shenandoah Valley and the greater Harrisonburg area.
📞 540-867-5702
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