How Mission Wealth Uses Tax Modeling to Identify Planning Opportunities | Holistiplan

In this brief video, we’ll review our tax strategy software and how we model tax-saving solutions for our clients every year. Let’s dive right in. First, we’ll start with an overview of building out a current-year model and why we do this. See, a lot of clients get their tax forms in February or March, and they give them to their accountant to file taxes for the prior year. But there’s nothing you can do because the year has already ended. So what we like to do is build a current-year projection before the end of the year and model tax-saving strategies so that you can take action before December 31st. This is a sample of them. Joe and Joe Biden released their tax return publicly. So we use that as our example. And what you’ll see on this page is all the way to the left you will see 2025 in my green box. That’s the prior-year tax return. The date as of this recording is March 2026.

You’ll see the current year on the right-hand side, 2026, and the change between the two years in the middle. Now, all the way to the left, you’ll start to see some different areas of the tax return that we can update. So, for example, on the income section, we can modify wages, dividends, interest, IRA distributions, Social Security, and more. And we change these figures from 2025 to 2026. And we look at every area of your tax life, from the portfolio to income to large capital gains such as real estate sales or business sales, etc. Once we build a current-year projection that’s pretty accurate, we will go into the tax report. This is the cleanest and most digestible set of information regarding your tax life. We start with key figures up top. These will tell you areas like your total income, deductions, and total tax on the federal side, as well as your average tax rates, marginal bracket, and then, of course, deductions and capital gains.

But as we make our way down, you’ll start to see a lot more tax clarity. First is where you get your tax bill from. Some of it will be ordinary income. Some of it might be capital gains or investment income tax, and maybe some of it might be self-employment tax. We do take a look at your tax brackets and start to see if it makes sense for you to realize taxes if you’re in a low bracket. A prime example of this is upon retirement: your tax bracket tends to be lower, and you may have some years before you have additional sources of income, like Social Security, that come in down the line. In this case, you’ll see on the left-hand side the federal tax brackets. They range based on your income, and they go up the more income you have. In this case, Joe and Jill are in the 12% tax bracket. And you’ll see an example of that in the graphic to the right. In this case, their income is 25,000, of which is taxed at 10% below the 10% line. And they have about 31,000 that is in the 12% bracket.

What this tells us is that we have a good amount of room inside the 12% bracket to start making some tax maneuvers like Roth conversions or potentially realizing capital gains. You’ll notice that after the 12% bracket here on the left, it jumps quite a bit to 22. So, we want to take advantage of this low tax bracket. Outside of income tax, we also look at capital gains tax to make sure we understand if you are in the 0, 15, or 20% capital gains bracket and how to effectively realize gains, especially if you have that cherished 0% tax bracket available. We go beyond just income taxes and capital gains taxes. We look at where your Medicare premiums will fall in this chart. We take a look at all of your deductions and see if you’re taking the standard deduction or if you have qualified expenses that allow you to deduct more on your tax return. We can advise on bunching deductions to get you to take larger deductions every single tax year if possible.

We do take a look at long-term capital gains and losses and the tax efficiency of your portfolio. So the portfolio efficiency is broken up into three categories. Dividends: qualified dividends are taxed more favorably than non-qualified dividends. So we like to look at that. We look at interest. Taxable interest versus tax-exempt. So this is a perfect example where we would notice this sample client does not have any tax-exempt interest. We may want to change that. And then on the capital gains side, long-term capital gains, positions you’ve held for more than one year, are taxed more favorably than shorter-held positions, which we want to make sure we are accounting for. Last but not least, the cherry on top is that we also look at every possible deduction and tax credit you may qualify for and make sure that you’re getting the most out of your tax return and spotting errors if you’re missing valuable deductions or credits.

In this example, a recent change to the tax code was increasing the state and local tax deduction, also called the SALT deduction. And we can see here that this sample, they are now within range of being able to take more deductions for state and local taxes. That’s all there is to it. We look at this process every single year for all of our clients. And again, the point is to build this model before the end of the year so we can effectively make changes in your tax life and save you tax dollars either in the current year or in the long term. Thanks for taking some time with us. We appreciate it.