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The VBC: Taking Advantage Of A Lower Income Year (AI generated summary)

By August 14, 2017 No Comments

The following is an AI generated summary of our article, “The VBC: Taking Advantage of a Lower Income Year.

Summary: The article introduces “The Very Best Conversation” (VBC) series focusing on notable client discussions regarding financial planning. It highlights a case where a married couple experienced a reduced income year due to one spouse starting a new business and the other taking a break. The couple aimed to manage their financial situation efficiently amidst income fluctuations and sought guidance on tax planning. The article emphasizes three main points:

  1. Income Fluctuations and Tax Planning:
    • Income changes, such as transitioning from corporate roles, can impact tax brackets and necessitate effective tax planning.
    • Reducing taxable income can involve strategies like utilizing liquidity from capital gains and managing withholding.
  2. Optimizing Tax Withholding and Capital Gains:
    • Withholding on exercised restricted stock units (RSUs) led to an overpayment, creating an effective tax credit for the clients.
    • By selling concentrated stock and taking advantage of lower capital gains rates, the clients obtained liquidity for their reduced-income year.
  3. Importance of Trusted Professionals and Proactive Planning:
    • Collaborative efforts between financial advisors, tax professionals, and clients are crucial for accurate and effective planning.
    • Assessing withholding, leveraging tax-efficient strategies, and seeking ethical advisors contribute to successful financial management.

The article underscores the importance of tax awareness, collaboration, and proactive planning in managing financial changes effectively.

Key Takeaways:

  1. Income fluctuations impact tax brackets, requiring efficient tax planning.
  2. Overpayment of taxes through RSU withholding creates an opportunity for tax credits.
  3. Leveraging capital gains strategies can provide liquidity at a reduced tax rate.

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