By Steve Crifasi, CTFA, CFP®

At Westover Capital Advisors, we have always appreciated the diversity of our clients. For us, developing strategies that address our clients’ unique financial and personal priorities is a rewarding challenge. One of the main focuses of our financial planning is managing taxes for high-income earners.

Reviewing a prospective client’s most recent tax returns is part of our onboarding process. Doing so gives us valuable insight into their financial profiles. How do they earn income, and do they make charitable donations? Do they take standard deductions or itemize their write-offs? Do they take retirement fund distributions or contribute their pre-tax income to their employer’s retirement plan?

With so many considerations, stamping out a cookie-cutter plan for all our clients doesn’t make much sense. Our philosophy of taking a personal approach to taxes for high-income earners is what sets us apart from other wealth management firms.

Evaluating Asset Classes

Defining asset types is a core part of our planning process. We break down our clients’ assets into three categories:

• Pre-tax: Qualified retirement assets, such as 401(k)s and traditional IRAs
• Taxable: Cash, taxable investment accounts, and revocable trusts
• Tax-free: Roth IRAs and HSAs (health savings accounts)

These identifiers help our clients see how balanced or concentrated their overall assets might be. We generally recommend a diverse mix of all three types to maximize taxes for high-income earners while we encourage moving as much as they can into tax-free “buckets.”

For example, we have two clients in the high-income bracket who are seeking to rebalance their holdings to modify their tax liabilities. After reviewing their returns, we recommended each launch a donor-advised fund (DAF) that allows them to donate their funds to channel their gifts for immediate tax deductions.

Rather than making incremental donations that span multiple years, we suggested they “bunch” several years of donations into 2024. Doing so greatly reduces their taxable income for this tax year, letting them itemize each deduction instead of making them take the standard deduction.

This approach works well for clients with a high number of deductible expenses, especially homeowners and those with advanced medical needs. Taking the standard deduction could seem easier, but when evaluating taxes for high-income earners, it might make them miss out on opportunities to greatly lower their tax exposure.

Handling Roth Conversions

One of our priorities regarding taxes for high-income earners involves rolling their retirement funds over to Roth IRAs. This is especially beneficial to our high-net-worth clients who have retired but have not yet taken distributions from their traditional IRAs or 401(k) plans.

In a Roth IRA, assets can grow tax-free with no required minimum distributions (RMDs). This can be particularly advantageous to high-income earners who can afford to make after-tax contributions to their Roth funds in exchange for tax-free distributions after they retire. They can also hold off on taking distributions in retirement and watch their investments continue to grow.

While this strategy has historically been beneficial to many of our clients, it may need to be adjusted or replaced for others. Thankfully, our flexibility allows us to find alternative approaches toward taxes for high-income earners.

Westover Capital Advisors: Managing Taxes for High-Income Earners

Westover Capital Advisors is dedicated to the financial health of our clients. Whether you’re in a position to take advantage of new growth opportunities or prefer a more traditional investment approach, you can count on our advisors to take the time to understand your situation and priorities. We believe there’s simply no better method for analyzing personal finances than making it a little more personal.

Let us review your financial and tax profiles to find answers that can pay off during retirement. To get in touch, contact us online, call (302) 427-9600 or email [email protected]. We look forward to hearing from you.

About Steve

Steve Crifasi serves as Associate Director of Wealth Management and Business Development at Westover Capital Advisors, an independent, fee-only, and privately owned investment and wealth management firm founded in 1999 and based in Wilmington, Delaware. Steve provides tailored guidance and works in partnership with his investment, tax, and planning colleagues to understand clients’ wealth management goals and objectives and help fulfill them. Steve thrives off developing personal relationships with clients, serving as their reliable and trusted financial partner; and as a fiduciary, he provides advice that is always in their best interests. 

An advisor since 2008, Steve has over 15 years of experience in the financial services industry. He began his career as a research analyst at Penn Square Capital focusing on the equity and private real estate markets and spent over 13 years at Glenmede and Wilmington Trust as a relationship manager for high-net-worth clients. Steve received a BBA in Finance from Villanova University and also holds the CERTIFIED FINANCIAL PLANNER® certification and Certified Trust and Financial Advisor (CTFA) designation from the American Bankers Association. In addition to his role at Westover, Steve is a member of the Delaware Estate Planning Council and Wilmington Tax Group. He has also served on committees for several local charitable and nonprofit organizations in and around Wilmington. To learn more about Steve, connect with him on LinkedIn.