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I cover personal finance issues that face Gen X and the Middle Class. I also focus on the financial impact of life transitions such as divorce, job changes, or death of a partner. Each month I will also be sharing a market commentary titled “Here’s To Your Wealth”. My blog... Read more

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Long-Term Tax Strategy: 5 Questions to Ask Your Advisor

The Tax Deadline is quickly approaching and the influx of 2016 tax tips is hitting the newsstands. While it’s a great time to brush up on the tax laws and create a 2016 game plan, it’s also important to take a step back and think about the bigger picture and your long-term tax approach.

The Rising Tax Burden
Today’s middle class is faced with many financial challenges – a tough job market, stagnant wages, lack of savings (we will hyperlink my latest Forbes article here latest article here), and the rising cost of health care (from both higher premiums and higher deductibles). The increasing tax burden on the middle class is also a headwind for those trying to gain their financial freedom and retire comfortably. With Federal debt at an all-time high, and state capitals needing to fund their budgets, the middle class will likely be asked to pay more. Whether it is in the form of higher federal and state income taxes, property taxes, higher fees (such as raising the cost of car registrations, toll roads, various licenses, etc.), or the elimination of deductions and loopholes, lawmakers can get creative when they need to raise money. And despite what some politicians say, our current economic climate is showing few signs for a lower, future tax environment. In fact, some politicians are openly calling for an increase in taxes.

Tax Burdens

More than ever before, today’s middle class needs to be aware of this rising tax burden and take steps to reduce its impact now and in the future. As you begin creating your 2016 game plan, remember this bigger economic picture and consider a longer-term approach to reducing the tax burden’s impact on you.

Long-Term Tax Strategy
The strategic tax moves that we are talking about here go beyond the usual deductions in our annual tax filings. Your financial planning should include a short and long-term tax strategy, and because the strategies vary from person to person, it’s best that you to speak with a financial professional. When looking into your long-term tax approach or when you meet with your financial professional, ask yourself (or him/her) the following questions.

• Ordinary income, capital gains, and dividends all have different tax treatment. Am I managing my tax bill accordingly?

• Before I sell an asset, am I considering the tax implications?

• What are the future tax implications of my savings/investments? Have I looked into tax-advantaged options (e.g. Roth IRA’s or tax-advantaged permanent life insurance)?

• Have I considered asset location as a tax management tool (e.g. placing bonds, multi-asset funds, and actively traded strategies, etc., inside tax-deferred vehicles, and placing tax sensitive equities and municipal bonds in taxable accounts)?

• What is the after-tax cost of my current debt, and if it is low, how can I leverage this smart debt to my advantage?

The answers to these questions and your subsequent actions will help you reduce the impact of this rising tax burden. Keep in mind that you are not alone in this. As I wrote in my first Forbes article, ‘In 2015, married joint tax filers with a combined income of $74,901 are in the 25% tax bracket; single filers enter the 25% bracket at $37,451. State income tax can in some instances add nearly ten percentage points bringing a typical Gen X family into a 30% or higher tax bracket. Additionally, if you are in one of the highest tax brackets and subject to the investment taxes within the Affordable Care Act, you can approach a 50% tax bracket!’ You are ahead of curve by acknowledging our current economic climate and considering a new approach. Though the tax burden is rising, you can work to limit its impact on you and your financial future.

Mark Avallone, MBA, CFP®, CRPS®.

Securities and Investment Advisory Services offered through H.Beck, Inc., Member FINRA/SIPC. 6600 Rockledge Drive, 6th Floor, Bethesda, MD 20817 301.468.0100. Potomac Wealth Advisors, LLC is not affiliated with H.Beck, Inc.
This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding any funds or stocks in particular, nor should it be construed as a recommendation to purchase or sell a security. Past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. Diversification and asset allocation do not guarantee against loss. They are methods used to manage risk.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
*The economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Consult your financial professional before making any investment decision.

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Mark Avallone, MBA, CFP®, CRPS®

About Mark Avallone, MBA, CFP®, CRPS®

I am the Founder and President of Potomac Wealth Advisors, an independent financial advisory firm headquartered in Rockville, MD and also the author of Countdown To Financial Freedom, Your Path to a Meaningful, Active and Vibrant Retirement. In addition, my commentary on the markets and the issues facing investors has appeared on the Fox Business Network and in USA Today, US News and World Report, The Wall Street Journal and other publications. Previously, I was a Senior Vice President in The Private Bank of Bank of America and a VP in the Corporate Banking Division of Mellon Bank. I am a CERTIFIED FINANCIAL PLANNER practitioner, a Chartered Retirement Plans Specialist and hold an MBA degree from Rutgers University. I am a proponent of financial education, and have been an adjunct professor of finance at The University of Maryland University College. For more information please visit my website, You can contact me at 301-279-2221 or at


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