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4 times you should always ask, “How will this affect my taxes?”

Considering the tax implications of key financial moves could save you money. Here’s what you need to know.


WE MAKE BIG FINANCIAL DECISIONS all the time. But we don’t always ask, “How will this affect my taxes?” Here are four times when considering the tax consequences — and possibly adjusting your strategy — could make a difference.

Buying or selling a home

Did you know you could be eligible for a capital gains tax exclusion on the first $250,000 of profit — $500,000 if you’re married and file jointly — when selling your primary residence?


“Remember, too, that tax laws change frequently, and anticipating future shifts in tax rates and rules could help to influence the financial decisions you make today.”

— Vinay Navani, tax accountant, WilkinGuttenplan

You and your spouse, if you’re married, must have lived in the house for at least two of the past five years. With the maximum capital gains tax rate generally at 20%, that exclusion could save you up to $100,000. The exclusion can’t be used if you excluded the gain from another home within the prior two years.


A move to consider: Staying until the two-year threshold has been met, as the capital gains exclusion applies only to your primary residence.


Don’t forget: When calculating the amount of tax owed on the sale, you can add the cost of certain home improvements you make before you sell to the cost basis of the home. The higher the basis, the smaller your gain — and the less you’d have to pay taxes on.

Paying for healthcare

See if your employer offers a high-deductible health plan that enables you to make contributions to a qualifying health savings account (HSA). If you otherwise meet the eligibility requirements for an HSA, when you link a high-deductible health plan to an HSA, your contributions are tax deductible, or may be made by pre-tax salary deductions if allowed by your employer. Earnings and withdrawals for qualified medical expenses are federal income tax-free.


A move to consider: If your HSA allows you to invest the money you contribute, its potential growth could help you pay for healthcare costs as you age and even cover the cost of Medicare premiums.


Don’t forget: Money contributed to an employer-sponsored flexible spending account (FSA) for healthcare expenses offers another way to lower your federally taxable income. Participating in certain types of FSAs may have an impact on your eligibility for HSA contributions.

Selling stocks and bonds

“In most cases, there are tax consequences when you sell investments to realize gains. But not all investments are taxed at the same rate,” says tax accountant Vinay Navani of WilkinGuttenplan.1


Bond interest and dividends from real estate investment trusts (REITs) are generally taxed as ordinary income, at rates as high as 37%. Qualified dividends and gains from the sale of investments owned for more than a year are eligible for long-term capital gains rates, which currently are generally capped at 20%. In either case, an additional 3.8% net investment income tax may apply for taxpayers with incomes above a certain threshold.


A move to consider: In general, think about having non-income-producing investments, such as growth stocks, in your taxable accounts and keeping investments that generate income, such as corporate bonds, in tax-deferred accounts.


Don’t forget: It’s possible to offset capital gains by selling investments that have dropped in value. You can generally deduct up to $3,000 (or $1,500 if married and filing separately) of capital losses in excess of capital gains per year from your ordinary income. Any unused capital losses can be rolled over to the next taxable year.

Investing for retirement

Traditional 401(k) contributions are made on a pre-tax basis, giving you immediate savings by reducing your federal taxable income. In addition, investment income in your traditional 401(k) account is not subject to federal income taxes until money is taken out at retirement, when it’s taxed as federal ordinary income. Roth 401(k) contributions are made with after-tax income, but then qualified withdrawals starting at age 59½ are potentially federal income tax-free.


“In most cases, there are tax consequences when you sell investments to realize gains. But not all investments are taxed at the same rate.”

— Vinay Navani, tax accountant, WilkinGuttenplan

A move to consider: Splitting your contributions, putting in enough as traditional 401(k) contributions to limit your taxable income and keep from rising into a higher tax bracket, then putting the rest in as Roth 401(k) contributions.


Don’t forget: Be sure to contribute enough to your 401(k) to earn the maximum matching contribution from your employer. Until recently, companies could allocate matching contributions only to a pre-tax account in your 401(k) plan, meaning any match of the employee’s Roth contributions would be made on a pre-tax basis. Since the enactment of the SECURE 2.0 Act of 2022, employers can now offer to match contributions on a Roth basis as well.


This is just a sampling of the kinds of situations where you might benefit from being more tax aware, notes Navani. “Remember, too, that tax laws change frequently, and anticipating future shifts in tax rates and rules could help to influence the financial decisions you make today.” You should discuss tax-related strategies with your tax advisor. Your financial advisor can work with your tax advisor to help ensure your wealth management strategies are aligned.


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1 As a CPA and shareholder at WilkinGuttenplan, Vinay Navani is not affiliated with Merrill or any of its affiliates. This article is for information and educational purposes only. Opinions and views expressed are his, do not necessarily reflect those of Merrill or any of its affiliates and are subject to change without notice.




The information contained in this material does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation, offer or solicitation for the purchase or sale of any security, financial instrument, or strategy. Before acting on any recommendation in this material, you should consider whether it is in your best interest based on your particular circumstances and, if necessary, seek professional advice.


Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.


Investing involves risk. There is always the potential of losing money when you invest in securities. Past performance is no guarantee of future results.


All recommendations must be considered in the context of an individual investor’s goals, time horizon, liquidity needs and risk tolerance. Not all recommendations will be in the best interest of all investors.


This material should be regarded as educational information on healthcare and is not intended to provide specific advice. If you have questions regarding your particular situation, you should contact your healthcare, legal and/or tax advisors.

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