Working with a financial planner or a wealth advisor is one way to learn how to invest and find opportunities to get your money working for you. But is the cost of a financial planner something you can deduct from your taxes?
Are Financial Advisor Fees Tax Deductible?
The question of whether fees paid to a financial advisor are tax-deductible is a fairly common question, and with good reason. Simply put, they used to be. The International Institute of Financial Planning & Investment Advisory explains that “Investment-related tax deductions were among the various deductions abolished by the Tax Cuts and Jobs Act (TCJA) in 2018.”
One of the major implications of the removal of this tax deduction is that some people felt discouraged from seeking the advice of a wealth manager. They felt that the average financial advisor fees may be too high without the tax benefit. They just weren’t seeing the big picture and the overall value inherently built into a financial advisor’s cost.
With a wide range of solutions that a financial advisor can offer, it’s difficult to estimate an average cost in the first place without speaking to a financial advisor about their work. For different clients, a wealth manager may handle:
- Retirement planning
- Managing an investment portfolio
- Tax planning
- Long and short-term financial advice
- Estate planning
And moreover, they may handle any combination of these services for any given client.
Interestingly, the fast-moving nature of tax laws, particularly where deductions and savings are concerned, is an excellent example of why working with a financial planner is so helpful and important. Tax laws change every year, and it’s the job of a financial planner to stay abreast of those changes and to help you to navigate them in service of your financial goals. With that knowledge, even if they aren’t tax deductible, financial advisor fees can be well worth it.
Strategies That Can Help Keep Your Tax Bill Low
Without this deduction, your financial advisor can help you find a range of strategies to help you keep your tax bill low. These might include
Take Advantage of Tax Deductions
By taking advantage of other tax deductions, you may be able to reduce your taxable income and ultimately lower your tax bill. Some common deductions may include:
- Charitable donations
- Mortgage interest
- Medical expenses
Contribute to Retirement Accounts
Contributions to retirement accounts such as traditional IRAs or 401(k)s may be tax-deductible. By making contributions to these accounts, you might be able to lower your taxable income and reduce your tax bill.
In addition to the tax savings, you are also saving for your retirement so it is a win-win!
Plan Your Capital Gains and Losses
Capital gains are the profits made from selling an investment, while capital losses are the losses incurred from selling an investment. By harvesting your capital gains and losses, you may be able to offset your gains with your losses and potentially reduce your tax bill.
For example, if you have a $5,000 gain from selling one stock and a $3,000 loss from selling another stock, in the right circumstances, you can offset the gain with the loss and only pay taxes on the $2,000 difference.
Find a Financial Advisor
If your tax situation is complex or you’re not comfortable preparing your own tax return, consider hiring a tax professional as well as a wealth management advisor. A tax professional can help you identify deductions and credits you may have overlooked, ensure that you’re complying with all tax laws, and potentially save you money on your tax bill.
How Dechtman Wealth Management Can Help
Dechtman Wealth Management is a fiduciary financial advisory firm in Denver, Colorado. As fiduciaries, we are committed to working only in the best financial interests of our clients. Where other advisors are commission-based, with a complex fee structure that can be hard to understand, Dechtman Wealth Management operates on a transparent and straightforward management cost that will depend upon your particular circumstances.
The financial advisors at Dechtman Wealth Management understand that every individual and family has unique financial needs. We offer personalized and customized portfolios that are specific to you. We also believe that you deserve complete transparency and to know where your money is being invested.
Depending on our clients’ needs, our services may include
- Proactive advice on all finances
- Retirement income planning
- Net worth projections to guide financial decisions
- Social Security maximization analysis
- Advisors who understand your career and financial trajectory
- Integrating assets not directly managed by advisor
- Customized plan that incorporates tax planning and investments
- Estate planning recommendations
- Outsourcing of time & stress required to make financial planning decisions
- Legacy planning
- Guidance on tax-advantaged charitable giving
- Help in building a team of experts to meet all your financial needs (CPA, Estate Planning Attorney, Business Succession, etc.)
And, of course, Dechtman Wealth Management provides exactly the type of tax planning that we’ve discussed here. We work closely with our clients to understand their overall financial goals and to help create a strategy to meet them. Our financial advisors use many proven tax planning strategies to help you meet your financial goals, including the following:
- Withdraw strategically
- Invest in your needs
- Monitor your account regularly
- Give thoughtfully
To learn more about what Dechtman Wealth Management can do for you, schedule a free assessment.
Important Disclosure Information
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Dechtman Wealth Management, LLC [“DWM”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from DWM. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. DWM is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the DWM’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.dechtmanwealth.com.
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