Tax season got you down? Try running this diagnostic review
By Whether you filed your taxes on time or you filed an exemption, tax season is a great time to run a diagnostic review on where you’ve been in the last couple of years and what your tax situation looks like going forward.
In that spirit, I want to give you a few steps to zero in on your tax burden and help you find ways to be more efficient.
What’s your MAGI?
Just as important as your overall income is your Modified Adjusted Gross Income, which is basically your adjusted gross income with certain deductions added back in. Is it trending higher or lower? Let’s dig in to figure out what’s happening and whether there’s anything you can do about how your income is being realized, so we can be more efficient moving forward. If you can be more efficient and stay in a lower tax bracket, that may mean more money for you and your beneficiaries and less for Uncle Sam.
Capital gains and harvesting tax losses
As your financial advisor, I review tax-loss harvesting opportunities each year to help optimize your tax situation. But in good market years like the one we just had, tax loss harvesting is often very difficult to find. For investors who were in our portfolio throughout 2025, strong market conditions meant that opportunities for tax-loss harvesting were more limited, as fewer positions experienced material declines.
Fast-forward to the first quarter of 2026, when the market saw losses in the first quarter. For example, the S&P 500® ended down approximately 7%. Investors are worried by AI, what’s going on with oil and gas prices due to the Iran war, and where inflation is headed. This may be a good time for us to consider some beginning-of-the-year tax loss harvesting on certain positions in the portfolio.
In addition to the investment markets, many of you own real estate. Perhaps you have an investment property or lot in your portfolio that hasn’t performed well. This could be a good time to be strategic about taking capital gains from real estate that has met its goal and reallocate them to a more appropriate asset.
Look at your overall asset allocation
This is also a good time to look at your overall asset allocation. I don’t just mean your investments; I mean the whole picture. We’re talking about stocks, bonds, and cash, as well as asset location. Do you have a family farm, multiple rental properties, a business, an inherited asset, or a second home?
For all of these assets, we need to see where they are held and why. Are you saving in a way that will make your retirement more tax-efficient, or do we need to make some tweaks? If you’re already retired, what do you need to take from these assets for your retirement income?
Knowing those things will allow us to recommend any changes needed to help streamline your tax situation.
Plan for RMDs
Whether you’re pre-retirement or retired, the topic of required minimum distributions should begin to show up on your to-do list in your 60s. Even though you typically don’t have to start taking them until the year you turn 73, now is the perfect time to come up with a preemptive plan to be tax-efficient with your RMDs. This may be the time to consider Roth IRA conversion opportunities, taking into account applicable rules and tax considerations, if RMD income is not needed for your lifestyle. Your future self will thank you as you work to improve your overall tax situation for yourself and your beneficiaries.
Create or update your charitable giving plan
In my opinion, it’s important to have a charitable giving plan that supports your giving goals while also delivering as much tax efficiency as possible. That ultimately allows you to give more away, whether it’s to charity or to the next generation.
If you are self-employed and have variable income years, or you’ve got significant income from bonuses or stock options that fluctuate from year to year, this review is a good time to consider bunching your charitable donations for maximum tax efficiency.
Without getting into the weeds, the simple version is this: If you currently give $10,000 per year to your church or charity, a bunching strategy would be to combine some of those years into one when you have a higher income year. Consider putting it into a donor-advised fund to potentially receive a charitable deduction in that tax year that may offset any capital gains you have. Then you’d be able to distribute that money to the charity of your choice over time.
Ask for help
Depending on your financial situation, running this type of financial diagnostic can be complex, with many factors to consider, especially as you approach your retirement years. That’s where a financial advisor can come in and see the big picture.
If you’re grimacing at your tax bill this April, contact my team today and let us help you with a thorough review of your unique tax situation so we can come up with strategies to help you be more efficient moving forward.
Family Financial Partners does not provide tax advice, but we do coordinate our services and work together with our clients’ tax professionals. Please consult with your tax professional for additional guidance regarding tax-related matters.
Article by David Smyth, Senior Partner and Wealth Advisor at Family Financial Partners — a financial services firm in Lexington, Kentucky.