We recently sat down with one of our good friends Steven Jarvis CPA to discuss tax strategies everyone should be considering whether they’re currently in the middle of retirement planning or trying to secure their retirement.
In one of our previous podcasts, we also sat down with Steven to discuss taxes.
In fact, many of our clients also started working with Steven, and one thing that we continue hearing is that he helps eliminate the stress of taxes. According to him, the stress comes from stressing about doing taxes in April rather than engaging in tax planning throughout the year.
Steven and his team work intensely after-tax season to ensure that their clients follow the recommended tax strategies. So, we’re going to pick Steven’s brain to see what he recommends for your mid-year tax strategies.
First, Don’t Be Under the Impression That There’s Nothing You Can Do About Your Taxes
Before going any further, how did you feel about your taxes this year? Did you feel like you did your duty, paid your taxes and there was nothing else that you could do? If so, you’re like a lot of people that accept taxes as being a part of life.
And they are.
But you shouldn’t leave the IRS a tip because you’re not leveraging tax strategies. Taking a proactive approach to your taxes means that you’ll minimize your tax burden as much as legally possible.
Since it’s the middle of the year, it’s time to start thinking about them to lower your coming tax burden.
A few options available are:
Qualified Charitable Distributions (QCDs)
QCDs are one of the tax strategies that we often see with our clients. Steven explains that a QCD works by:
- Taking money directly from your IRA
- Sending the money straight to the charity
- Meeting the QCD requirement of 70 1/2
The money cannot be made out to you or hit your bank account to benefit from a QCD. Instead, this is a process we look at in conjunction with handling your required minimum distributions (RMDs).
QCDs are powerful because when you take money from your bank account and donate it to a charity, there’s a 90% chance you’re not benefitting from it come tax season.
Ninety percent of people do not itemize their tax returns, so they’re unable to deduct their donations.
QCDs allow you to:
- Gift directly to charity
- Benefit from lower income and tax rates
Another advantage of a QCD is that it lowers your adjusted gross income, too. Why is having a lower adjusted gross income important? Your Medicare benefit costs will be lower if your AGI is lower.
- Paying less in healthcare costs
- Lowering your taxes
- Donating to a cause you care about
QCDs are a great way to give back and receive a benefit from it, too. However, if you’re not 70-1/2 or the standard deduction is more beneficial than itemizing your taxes, what can you do?
Use a donor advised fund.
Donor Advised Funds and How They Work
A donor advised fund (DAF) is something to consider when you can’t use QCDs. DAFs allow you not to tip the IRS and still take a standard deduction. These funds will enable you to:
- Lump multiple years of donations into a fund
- Taxpayers still control the funds
- Eventually use the funds for charitable purposes
- Get your donations above the standard deduction to itemize
For example, if you donate $10,000 a year, you may not have enough to itemize and take the deduction. Instead, you may decide to put $30,000 into a DAF and immediately benefit by being able to itemize your taxes.
You don’t even need to distribute all the funds to a charity today and can simply opt to give every year to a charity of your choice. The key is to send these funds to a charity at some point.
So, this year, you put $30,000 into a DAF, itemize your taxes, and lower your tax burden.
Next year, you’ll likely go back to the standard deduction, so you’re paying less taxes this year and not paying any additional taxes for years you don’t contribute to a DAF.
However, there are also Roth conversions, which may help you with your tax strategies, too.
Roth Conversions to Lower Your Tax Burden
A Roth conversion converts a non-Roth account into a Roth. You take money out and pay taxes on it now, and let it grow tax-free in the future. You’ll pay more taxes this year, but your money grows tax-free afterward, which is great as your retirement accounts gain interest over the years.
Should you do a Roth conversion?
We believe everyone should consider a Roth conversion, but what does Steven think? We asked him.
- Everyone should consider a Roth conversion if they have IRA dollars.
- Conversions aren’t the right option for everyone.
- Roth conversions this year happen at a discount because of the markets.
In 2026, taxes are set to go up if nothing else changes, so putting money into a Roth account protects you from higher tax burdens.
If you’re in your peak earning years, it may not be in your best interest to go into a Roth conversion.
Steven states that the only way you’re worse off is if taxes go down. But are you really convinced that taxes will go down in the near future? Most people respond with no.
In this case, a Roth conversion is beneficial.
You’ll need to make your Roth conversion by 12/31 of the year.
Finally, Steven recommends having tax conversations outside of the tax season. You need to take a proactive approach to your taxes, work with a CPA and develop tax strategies to save money on your upcoming taxes.
If you wait until March or April to think about your taxes, it’s too late.
Sit down with a professional, discuss your options and determine what tax strategies you can use this year to lower your taxes – or not leave the IRS a tip.
Click here to learn more about our book: Secure Your Retirement: Achieving Peace of Mind for Your Financial Future.