Welcome, Guest!

Check out the topic bundles including the Client Service Calendar and client engagement support materials

Designed to help advisors introduce our guides to a client.

Let us know what you want to see from us next!

Need help with something? Checkout our our FAQs.

Edit your settings and view your plan details.

Back

What Will Have The Least Tax Impact: Harvesting Capital Gains Or Roth Conversions?

Category:
Tax Planning, Assets and Investment Planning
Blurred Flowchart

Become a Member to view.
Already a member? Login Here

Updated 12/1/2023

Clients often have outsized positions due to appreciation and large pre-tax retirement accounts. They may be looking to reduce portfolio risk and protect gains now, while also aiming to reduce their future income tax burden. Roth conversions and harvesting capital gains are two effective financial strategies that can achieve these goals; however, they accelerate income tax costs. There are current tax consequences associated with each strategy, and the issue becomes whether to accelerate ordinary income, capital gains, or a combination thereof.

Clients may struggle to choose the optimal balance between Roth conversions and harvesting capital gains. To help guide your conversations and the weighing of options, we have created this flowchart. It covers key considerations, including:

  • Expected need and future goals for the assets
  • Current tax brackets and the effect of increasing income (ordinary or capital gains)
  • Projected future income and tax rates
  • Collateral impact on Social Security, Medicare, wealth transfer goals, etc.

Please follow this link to read the article, written by Michael Kitces, that inspired this flowchart.


Related Guides
Important Numbers
Category: General, Tax Planning
Will The Deductibility Of My Retirement Plan Contributions Be Impacted By The QBI Rules?
Category: Working / Accumulation Phase, Tax Planning
Will I Receive A Step-Up In Basis For The Appreciated Property I Inherited?
Category: Tax Planning, Estate Planning
Will I Receive A Step-Up In Basis For This Gifted Property?
Category: Tax Planning, Estate Planning
Can I Do A Net Unrealized Appreciation (NUA) Distribution?
Category: Working / Accumulation Phase, Tax Planning, Assets and Investment Planning
Will My Roth IRA Conversion Be Penalty-Free?
Category: Tax Planning, Assets and Investment Planning
Should I Contribute To My Roth IRA Vs. My Traditional IRA?
Category: Working / Accumulation Phase, Tax Planning, Assets and Investment Planning, General
Will I Have To Pay Tax On My Qualified ESPP?
Category: Working / Accumulation Phase, Tax Planning
Pay Stub Review
Category: Tax Planning, General
Do I Need To Start Making Estimated Federal Income Tax Payments?
Category: Tax Planning
Is My Rental Property Tax Deductible?
Category: Retirement / Decumulation, Tax Planning, Assets and Investment Planning
Where Should My Next Dollar Go?
Category: General, Tax Planning
Can I Make A 529-To-Roth IRA Transfer?
Category: General, Working / Accumulation Phase, Tax Planning