COVID-19 Update

Alliant Wealth Advisors is an "essential business" under Virginia state law and we remain fully operational during the COVID-19 crisis.

To keep our clients, staff and colleagues safe we are currently holding all meetings via video conferencing. And we are alternating a small number of staff in our office while the majority serve you from their home.

Speaking of our office. Our headquarters in Prince William will relocate to the Signal Hill Professional Center at 9161 Liberia Avenue, Suite 100, Manassas, VA 20110 effective Monday, April 20, 2020.

Whether we are virtual or in person, we are here for you. Please keep safe.

Best Regards,

John Frisch, CPA/PFS, CFP®, AIF®, PPC®


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Tax Planning Under the TCJA Continued – Roth Accounts

As I mentioned in my last article, it’s been more than a year since the Tax Cuts and Jobs Act (TCJA) went into effect. Many of us should modify our tax planning as a result. Today, let’s discuss how to take advantage of Roth accounts, given current, lowered tax rates.

 Remember, unless Congress extends them, many of the TCJA’s sweeteners expire after 2025 – including lowered tax brackets. What if higher tax brackets return in 2026? To put this in context, if you’re married, filing jointly, and your taxable income is $165,000/year, your marginal tax rate jumps from 24% in 2019 to 28% in 2026.

Before TCJA, you may have assumed you’d be in a higher tax bracket during your working years, and a lower one in retirement. Therefore, it made sense to make tax-deductible contributions to your Traditional IRA and/or 401(k) during your working years, to avoid being taxed at high rates. You’d then pay taxes at a lower rate when withdrawing those assets in retirement.

However, if tax rates go up instead of down, it may now make more sense to contribute to a Roth IRA and/or Roth 401(k). You don’t get any immediate write-off (at lower rates), but you won’t have to pay tax on withdrawals later (at potentially higher rates).

You should also consider converting existing Traditional IRAs or 401(k)s into their Roth counterparts. This generates current tax on the dollars you convert at today’s lower rates. But once they’re in a Roth, you won’t pay tax when you withdraw them.

This isn’t an “all or nothing” venture, either. If you are a single filer, you’re in the 24% tax bracket in 2019 for taxable income between $84,200–$160,725. If your taxable income this year is $140,725, consider converting up to $20,000 from a traditional IRA or 401(k) to a Roth account. The $20,000 in additional income generated by the conversion will be taxed at the 24% rate, and then will never be taxed again. Avoid exceeding $160,725, so you won’t land in the 32% tax bracket. Repeat annually through 2025.

There are many other factors influencing these sorts of contribution and conversion choices. I strongly advise speaking with your financial advisor or tax accountant before acting.

Written by John A. Frisch, CPA/PFS, CFP®, AIF®, PPC™ who founded Alliant Wealth Advisors in 1995 and has over 30 years of experience as a financial professional. In his free time, he’s an avid long-distance runner, which fits right in with his dedication to helping families and retirement plan providers build durable wealth, while simplifying their financial path. Learn more at www.alliantwealth.com.

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