Barry Ritholtz (2:56)

let's bring in Bill Artsaronian. Full Disclosure Arts Ronian is the director

Vanguard Announcer (3:02)

of Tax Services at Ritholtz Wealth Management

Barry Ritholtz (3:05)

and we've been working with him for just about five years. So, Bill, let's start with a simple overview you've said before Tax advice is financial advice. I want to unpack that. How should investors be thinking about the role of tax planning in their overall wealth strategy, especially here in December?

Bill Artsaronian (3:30)

Well, thanks Barry for having me. Let's just think about a financial plan for a second.

Bill Sweet (3:34)

What part of a financial plan does

Bill Artsaronian (3:36)

not touch on taxes?

Bill Sweet (3:38)

I mean think about just basic cash flow planning. Taxes for our investors are often the largest expense in their annual budget. It's mortgage and taxes, those are the largest costs. Life insurance is thinking about a tax free inheritance for the next generation or for your heirs.

Bill Artsaronian (3:53)

Estate planning is all about taxes.

Bill Sweet (3:54)

If there was no estate tax, we wouldn't really have to think about estate planning.

Bill Artsaronian (3:57)

And then basic portfolio management is, is purely, you know, not purely tax centric.

Bill Sweet (4:04)

But our investors are thinking about tax all the time.

Bill Artsaronian (4:06)

Our clients would rather save $1,000 on

Bill Sweet (4:08)

taxes than make six figures in a trading day. So it's all connected. And the end of the year is

Bill Artsaronian (4:14)

like the report card. Tax planning should be happening proactively for 12 months.

Bill Sweet (4:19)

But we don't even stop there. We're not thinking about taxes as a current year item or even a lifetime item. We're thinking about this generationally. We're thinking about how can we set

Bill Artsaronian (4:27)

up the next generation of client children,

Bill Sweet (4:29)

client grandchildren for tax success.

Barry Ritholtz (4:33)

So, so we have a few weeks left in the year. What are the big boxes that you think investors should be checking and what important items do they ignore? What are the big mistakes people make?

Bill Artsaronian (4:44)

I think one of the misunderstandings is

Bill Sweet (4:46)

on tax deferral rather than tax avoidance.

Bill Artsaronian (4:49)

Many strategies can avoid tax or can defer taxes, but that bill will come due at some point. You know, think about even just a

Bill Sweet (4:56)

401k pre tax contribution.

Bill Artsaronian (4:59)

You're going to recognize that income at some point things like accelerated depreciation will come back to bite you on the

Bill Sweet (5:04)

recapture when you sell the asset. Opportunity zones are a tax deferral mechanism. These are all very useful because time

Bill Artsaronian (5:11)

value of money says that a tax

Bill Sweet (5:13)

deduction today is worth more than a tax deduction in the future, but eventually

Bill Artsaronian (5:18)

that there's going to be a tax hit.

Bill Sweet (5:20)

So I think that's a common misunderstanding.

Bill Artsaronian (5:22)

A few other mistakes is on capital gain timing. You know, we see, we see clients not really understand or consider the timing of when they recognize gains. When we, when we onboard folks, we're often pushing gains from the fourth quarter

Bill Sweet (5:36)

of say 2025 into the first quarter of 2026 because that gives us a

Bill Artsaronian (5:41)

full 12 months to tax loss, harvest and create losses to offset any capital gains. The flip side of that, of course, is even a small movement in a stock price can cost more than a

Bill Sweet (5:52)

tax bill just to sell it.

Bill Artsaronian (5:54)

So you have to be pretty comfortable

Bill Sweet (5:56)

holding the position for a couple weeks or even a couple months.

Bill Artsaronian (5:59)

And then the last mistake is misunderstanding. Just basic payment obligations. There are safe harbors to avoid estimated tax penalties. But on the flip side of that is if you pay too much, there's opportunity cost. If you have a big refund in April, that means you paid a little

Bill Sweet (6:16)

bit too much and that money could have been better put to use.

Barry Ritholtz (6:19)

So Bloomberg has a fairly sophisticated audience of high earning professionals. What are the three top moves you see for folks like that? They have a portfolio, they have a pretty decent income and they can expect to continue that for the foreseeable future.

Bill Artsaronian (6:37)

Let's start with charitable giving. We'll talk about it more throughout the show.

Bill Sweet (6:42)

But it's often the most accessible lever to pull for tax savings.

Bill Artsaronian (6:46)

The caveat being you need to be conscious of where your total deductions fall. We see some clients give a certain amount of charitable gifts and they don't even itemize their deductions. So from a federal tax standpoint, maybe they gave away 10k, but they're still taking a standard deduction.

Bill Sweet (7:01)

They're not benefiting from that charitable gift.

Bill Artsaronian (7:03)

So that's where bunching strategies and some other strategies with donor advised funds can come into play. Number two is on the equity comp side. Equity compensation for folks compensated through their company stock, the timing of the income can often be flexible.

Bill Sweet (7:19)

Think about stock options. Company stock options.

Bill Artsaronian (7:22)

We should be asking the question how much can we recognize in stock option income before the end of the year before we bump up against the next

Bill Sweet (7:28)

federal or state tax bracket?

Bill Artsaronian (7:30)

How much? If these are incentive stock options, how

Bill Sweet (7:33)

much can we recognize without paying AMT alternative minimum tax? These are questions we should all be asking if we have, if we're, if we're paid through equity or if we have clients that are paid through equity.

Bill Artsaronian (7:43)

And the last one is for small business owners.

Bill Sweet (7:45)

There's, there's a whole lot on the

Bill Artsaronian (7:47)

small business side of this. I'm focused a lot on qualified business

Bill Sweet (7:51)

income, which is a 20% deduction for pass through income.

Bill Artsaronian (7:55)

But there are limitations and those limitations

Bill Sweet (7:58)

can be on based on how much you pay your employees or yourself in a wage.

Bill Artsaronian (8:02)

If you don't meet a certain wage

Bill Sweet (8:04)

number, that QBI benefit could be significantly reduced or even reduced down to zero. If you're, if you're really screwing this up and then on the small business

Bill Artsaronian (8:12)

side, we should be looking at are

Bill Sweet (8:14)

we prepared to maximize retirement contributions. The max for one case is $70,000 this year between employer and employee contributions.

Bill Artsaronian (8:22)

And so you have to be ready

Bill Sweet (8:24)

to have that cash available to fund those contributions. Say you're a mom and pop shop, two owners, zero employees. Maybe you're structured as an S corp.

Bill Artsaronian (8:31)

You're going to have to, you're going have to come up with some cash

Bill Sweet (8:33)

to meet the 401k obligations either before the end of the year, before the tax filing.

Barry Ritholtz (8:38)

So I'm glad you brought up tax Advantage accounts like 401ks. There always seems to be a last minute frenzy to maximize not only 401Ks, but IRAs, Health Saving Accounts, 529s. How have the rules changed around credits and ceilings for this year and for 2026?

Bill Artsaronian (8:58)

Right. At least once a year with our, with our clients we're running through the

Bill Sweet (9:02)

quote unquote basics of all of these contributions. Are you on track to hit each

Bill Artsaronian (9:07)

of these with a 401k we just talked about?

Bill Sweet (9:09)

Little bit, but there's a 70k limit. Now if you're a W2 employee and you don't own the company, you're, you're going to make employee contributions. Maybe there's a mega backdoor Roth option in there for you. We talk to folks all the time

Bill Artsaronian (9:21)

who have this eligible or eligible in

Bill Sweet (9:24)

their plan, but they don't even know about it. Nobody's talking to them about this when they join the company. And that mega backdoor Roth allows you to put after tax dollars into the 401k, convert it to Roth and have a nice Roth tax free bucket growing alongside the pre tax contributions that you already made.

Bill Artsaronian (9:39)

IRAs don't come up a lot in our world for a few reasons. Number one is most of our clients

Bill Sweet (9:44)

are employed with a retirement plan through their employer. And if that's the case, deductible IRA contributions may be limited. However, there is a backdoor option in the IRA if you don't have any

Bill Artsaronian (9:58)

pre tax money in any IRAs you

Bill Sweet (10:01)

can make after tax contributions and again convert to roth in the IRA just as well as you can in the

Bill Artsaronian (10:06)

401k and then the HSA.

Bill Sweet (10:08)

I love tax nerds, love HSAs.

Bill Artsaronian (10:10)

You need to be, you need to

Bill Sweet (10:11)

be on a high deductible plan, which isn't for everybody.

Bill Artsaronian (10:14)

My colleague Bill Sweet and I, we

Bill Sweet (10:16)

ran an analysis on high deductible plans

Bill Artsaronian (10:19)

and we found that there's a pretty,

Bill Sweet (10:22)

there's a pretty Attractive break even on high deductible plans because the premiums are lower. And the long term benefit of investing deducting HSA contributions and treating those as another retirement vehicle, again, those are like Roths where they're tax free. Those, those can compound very, very nicely where maybe you retire early and let's say you retire 60 instead of 65,

Bill Artsaronian (10:42)

you have a five year gap where you need to cover probably significant health care premiums. That HSA can be used in that case.

Bill Sweet (10:48)

And it's a nice tax free bucket to have.

Barry Ritholtz (10:50)

And what do the ceilings look like on all these tax Advantage accounts for 2026? How has the recent legislation changed the max people can kick into those?

Bill Artsaronian (11:00)

The big change in 2026 is that

Bill Sweet (11:03)

Roth catch up contributions for folks over age 50 are now forced to be Roth contributions again start 2026.

Bill Artsaronian (11:11)

Historically catch up contributions which are going to be 7500 this year, 7500 next year. Folks in their 50s are often in their highest earning years, therefore the pre

Bill Sweet (11:21)

tax option is usually preferred.

Bill Artsaronian (11:23)

However, starting next year, the catch up

Bill Sweet (11:26)

contributions that 7,500 are going to be required to be Roth contributions.

Bill Artsaronian (11:31)

My theory is I don't mind this at all.

Bill Sweet (11:34)

Nobody ever regrets a Roth contribution. Nobody ever really regrets a Roth conversion

Bill Artsaronian (11:38)

because once you pay tax, you don't really think about it. And so if we have, you know,

Bill Sweet (11:42)

if we have investors in their 50s and 60s that are forced to make a small Roth contribution instead of a

Bill Artsaronian (11:46)

pre tax contribution, that just gives them exceedingly more flexibility down the line because now they're going to have different buckets of money to pull from in retirement.

Barry Ritholtz (11:56)

Sounds really interesting. You mentioned earlier tax loss harvesting. We've been using canvas as our direct indexing product, but it seems like this has become ubiquitous. What are your thoughts on tax loss harvesting? What does thoughtful harvesting look like?

Bill Artsaronian (12:13)

I think the term thoughtful there implies to me that there should be an

Bill Sweet (12:17)

ongoing activity, not just a year end item.

Bill Artsaronian (12:20)

Historically, taxpayers sell DIY investors and even advisors. They'd look at the portfolio in December. They'd say, okay, what's underwater? Let's book those losses through through direct indexing. This is now an ongoing activity. But you don't need a direct indexing portfolio to look at your portfolio. You can, even if, even if you're

Bill Sweet (12:38)

not in a direct indexing setup, you can still tax lost harvest throughout the year.

Bill Artsaronian (12:43)

Why just December? This should happen with regularity.

Bill Sweet (12:46)

There's nothing saying we can only book losses in December.

Bill Artsaronian (12:49)

Now a lot of this is dictated by individual stock market Volatility. But with a, with an ultra diversified bucket of stocks, some will ultimately be losers. So you sell those, you pick up tax losses, you invest in a similar company, so you keep the fidelity of the portfolio and then you don't trigger wash sale rules. The only caveat here is state by state stuff.

Bill Sweet (13:11)

New Jersey, for example, does not allow tax loss carryforwards.

Bill Artsaronian (13:14)

So we're doing, in December, we're doing

Bill Sweet (13:16)

a bit of the opposite with our New Jersey clients.

Bill Artsaronian (13:18)

We're actually, we're looking historically over the first 11 months, what did we realize in losses? Let's go make a gains harvest.

Bill Sweet (13:25)

Instead of realizing more losses, we're going

Bill Artsaronian (13:27)

to realize capital gains so we can

Bill Sweet (13:28)

use them at the state level this year.

Barry Ritholtz (13:31)

That's really interesting. So I know the deductions have, have changed. The standard deductions have, have become permanent. There are new floors, there are new ceilings for that. For itemized and charitable gifts, how should those people who are charitably inclined think about. You mentioned bunching donations or donor advised funds. Give us a little more detail about how people should be using these vehicles.

Bill Artsaronian (13:56)

Yeah, we're doing a lot of this

Bill Sweet (13:57)

with our clients throughout the year, but specifically at the end of the year,

Bill Artsaronian (14:00)

we kind of tee up charitable planning like here.

Bill Sweet (14:02)

Let's think about what we want to

Bill Artsaronian (14:03)

accomplish and then let's take a look

Bill Sweet (14:05)

at the end of the year and figure out how we're going to get this done and, and if it's the right year to do it.

Bill Artsaronian (14:09)

What we need to be conscious of is all the other deductions.

Bill Sweet (14:11)

Right.

Bill Artsaronian (14:12)

Like I, like I mentioned previously, you might have a hurdle rate before you

Bill Sweet (14:15)

even start to deduct your charitable gifts.

Bill Artsaronian (14:17)

And that's where you might want to consider bunching maybe three years, maybe five years, maybe 10 years worth of charitable gifts into 2025, for example. 2025, maybe it's a high income year. Maybe you're paying down your mortgage so

Bill Sweet (14:32)

you're not getting that mortgage deduction anymore.

Bill Artsaronian (14:33)

And you want to take advantage of

Bill Sweet (14:36)

an appreciated security that you, that you gift for charitable purposes.

Bill Artsaronian (14:40)

We do a lot of this. We take, maybe a client comes to

Bill Sweet (14:43)

us, they've worked at a tech company, the tech company, they've been compensated well in that stock.

Bill Artsaronian (14:49)

They have charitable intent.

Bill Sweet (14:50)

We say, okay, let's use that stock, let's send it to a donor advised

Bill Artsaronian (14:53)

fund, let's bunch five years worth of gifting. And now you have your own little

Bill Sweet (14:57)

charitable fund that you can make grants out of over the next five years.

Bill Artsaronian (15:01)

So we're going to, we're going to

Bill Sweet (15:02)

time the deduction, but we're not actually

Bill Artsaronian (15:03)

going to change the way you're giving.

Barry Ritholtz (15:06)

Really, really interesting. So I'm in New York, you're in Philly. These are big salt regions. I know the most recent big beautiful bill changed all sorts of things. Where are, this is a question I hear all the time. Where are we with salt deductions today? How has this changed? I know we're not quite back the way we were, but it seems to have improved for a lot of people. Tell us what's going on with state and local tax deductions?

Bill Artsaronian (15:35)

Well, it's good news for most folks. For some folks, it's not going to change a damn thing. It's going to. What we have here is the since 2017, the state and local tax deduction as part of your total itemized deductions was limited to $10,000. For folks, Barry, in New York, California, New Jersey, Connecticut, Pennsylvania, $10,000 just wasn't cutting it.

Bill Sweet (15:57)

A lot of, you know, we see tax returns here every day where they're sometimes six figures of state and local taxes between real estate and income taxes.

Bill Artsaronian (16:05)

The new limit is $40,000. That was maybe the most talked about

Bill Sweet (16:11)

provision of Trump 2.0 tax bill.

Bill Artsaronian (16:14)

It's an increase from 10k to 40k with caveats.

Bill Sweet (16:17)

If you're earning more than $500,000 of

Bill Artsaronian (16:20)

total income, you start to get phased out.

Bill Sweet (16:23)

These are for, these are for both single filers and married filers.

Bill Artsaronian (16:26)

Once you hit 600,000, you're all the way back to 10K. So we have some clients that are not going to see a change at all.

Bill Sweet (16:33)

They make $1 million a year. They're not going to benefit from this whatsoever.

Bill Artsaronian (16:36)

We see other clients where we're having tactical discussions on all kinds of income. Maybe we defer a capital gain into next year because we want to take full advantage of that salt deduction this

Bill Sweet (16:46)

year or maybe vice versa.

Bill Artsaronian (16:48)

But there's a lot more planning to

Bill Sweet (16:49)

do on all of these deductions. We talked about charitable. This is, this is along the same lines.

Barry Ritholtz (16:54)

What else from the big beautiful bill has changed the way you think about year end planning? Do any of these provisions show up as actual savings for clients?

Bill Artsaronian (17:04)

I think it's back to the charitable piece. There are some changes next year that are going to impact charitable giving which make 2025 perhaps more attractive from a charitable landscape. Next year there's going to be a

Bill Sweet (17:18)

floor on charitable gifts where the first

Bill Artsaronian (17:20)

0.5% of your AGI will not be

Bill Sweet (17:22)

deductible for charitable purposes.

Bill Artsaronian (17:24)

So if you make a million bucks, the first 5k you give away to

Bill Sweet (17:27)

charity provides zero federal tax benefit.

Bill Artsaronian (17:29)

The other change for the highest earning

Bill Sweet (17:32)

folks, folks in the 37% bracket, they

Bill Artsaronian (17:34)

are going to be limited on their overall deductions.

Bill Sweet (17:37)

They'll be treated as 35% taxpayers.

Bill Artsaronian (17:39)

So that 2% Delta can, can really

Bill Sweet (17:42)

add up when we're talking about, when we're talking about big deductions.

Bill Artsaronian (17:44)

So we're doing a lot of shifting of charitable salt deductions. Even mortgage, even mortgage deduction. We're trying to get most of that

Bill Sweet (17:52)

into 2025, especially for our highest income tax paying clients.

Barry Ritholtz (17:56)

So to wrap up, there's still plenty of time before the year ends. There are lots of moves individual investors can make to not only reduce the taxes they're going to owe for the 2025 year, but also to think about long term planning their estate, maximizing every opportunity the government gives us. Lots of ways to either reduce or defer our current tax bill. Everybody should take full advantage of what's on offer. I'm Barry Ritholtz. You're listening to Bloomberg's at the Money. All right.

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