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  • Writer's pictureW. Scott Hurt, CFP®, CPA

5 Great Questions To Ask Your Financial Advisor About Your Tax Plan

Updated: Feb 24, 2023

5 Questions to Ask Your Financial Advisor About Your Tax Plan

Proactive tax planning can be instrumental in your retirement plan and, when wielded properly, can help you achieve your financial goals. However, people often confuse it with tax preparation, meaning they miss many valuable opportunities.

Sound tax planning is a year-round strategy, so here are 5 important questions we think you should always ask your financial advisor about your tax plan.

Tax Planning Vs. Tax Preparation

Before we jump into the questions, it’s essential to highlight the difference between tax planning and tax preparation.

  • Tax preparation concerns accounting for all financial matters within a given tax year and filing the appropriate information on a tax return. Minor planning is often involved, which usually focuses on maximizing deductions to reduce the tax bill as much as possible.

  • Tax planning, on the other hand, is thinking about ways to reduce your total tax liability over multiple years. That strategy sometimes involves taking steps that increase your tax bill now to reduce your tax bill further at some point in the future, like with a Roth conversion or strategically realizing investment gains. The focus is on forecasting which actions you should take and when rather than recording the actions you already took. In other words, tax preparation is reactive, and tax planning is proactive.

Tax planning and tax preparation are vital in different ways, and we can help you with both. We are incredibly passionate about the impact tax planning can have on your long-term financial strategy.

Here is a 2023 tax number reference guide to help as you start to think about your own tax plan as well.

Now, let’s dive into the top 5 tax planning questions to review with your wealth advisory team.

Question 1: What’s Your Approach To Tax Planning?

Asking this question will help you understand how the advisor thinks about tax planning in relation to your larger financial and investment plan… or if they do at all.

Ask them specifically about their process and how they track progress.

  • How do you go about creating a tax plan for your clients?

  • What type of strategies do you see performing well?

  • How do you tailor those strategies to my situation?

  • What are the signs that the strategy “works”?

  • When will you make adjustments?

  • How does tax planning fit into your investment philosophy?

There are many good answers to these questions, but you want to hear that they have a process in place and take it seriously.

This question should also reveal what your current financial advisory team or potential advisor does to constantly add value. Beyond what they lay out during an initial plan, they should update tax plans annually. Doing so ensures you’re staying up to date with significant life changes that could impact your tax situation, like retiring, selling a business, selling significant positions in company stock, buying a house, marriage, etc.

Sometimes you’ll only need minor tweaks, but in other years new opportunities present themselves. For example, when your income is lower in early retirement, you may consider a Roth conversion.

Even though it could increase your taxable income, you could pay less in the long run if you aren’t collecting social security, pension income, required minimum distributions from retirement accounts, etc. You want to make sure your advisor can recognize and act on these sorts of advantageous opportunities.

Question 2: Based On My Situation, How Can I Improve My Tax Standing?

Once you ask this question, expect your advisor to ask you several questions in return because they’ll have to deeply understand the inner workings of your plan to give the most appropriate recommendations.

To do this correctly, they’ll want to look at your most recent tax returns and develop additional questions, which may include the following,

  • Are you taking advantage of every credit and deduction available? If not, are there small things you can do to increase eligibility for things like ACA credits, reduce your IRMAA surcharges, or lower your AGI?

  • Are you managing your capital gains? If not, they should offer specific actions to take to get a better handle on them.

  • Does a Roth conversion make sense?

  • Is your asset allocation tax-efficient? Are you investing in mutual funds, ETFs, index funds, etc., with lower ongoing tax liabilities?

These are just some examples; there are so many other possibilities! The strategies you should implement depend on your unique circumstances and goals.

Question 3: How Can I Strategically Include Charitable Giving Into My Tax Plan?

Many people make regular charitable gifts, but only some consider how to do so in the most tax-efficient way. That’s unfortunate because there are so many tax-friendly ways to give that can reduce your tax liability even further and maximize the value of your gift.

Retirees, in particular, have several great tools that your advisor should be familiar with.

  • Qualified charitable distributions (QCDs) are one of those ways. This strategic gifting method allows you to avoid taxation on distributions from your IRA even if you don’t itemize. It also allows you to manage your tax bracket, which impacts other taxable items elsewhere in your plan.

  • Donor-advised funds (DAFs) are another great option that allows you to deduct large gifts in a single year but control the payments to the charity.

  • Depending on how your assets are invested, it could make sense to donate highly appreciated securities. Your advisor should look at your taxable investments to see if donating them directly to charity can help you avoid recognizing capital gains.

  • Bunching is another strategic tax strategy that advisors often miss. Instead of making small donations each year, it’s sometimes better to make one large donation in a single year to clear the standard deduction hurdle and get a larger deduction.

Question 4: Does It Matter When I Withdraw Income from Retirement Accounts?

The answer to this question is a simple and resounding - Yes! This should be the foundation of a retiree's plan as it integrates investment management, investment strategy, income planning, risk, and taxes.

We can help you create a custom withdrawal plan that coordinates all of these elements for your needs. Your withdrawal plan will spell out in black and white the amount you’ll take, the timing of your withdrawal, which accounts you’ll pull from, and how to structure your investments to make it all work to support your lifestyle.

Don’t forget about RMDs. One of the reasons that multi-year tax planning is so important is it may reveal ways that you can reduce or avoid RMDs altogether. However, for many people, it will be a retirement reality.

Question 5: What Tangible Value Does Tax Planning Bring To My Finances?

Taxes are a fact of life and will impact your retirement. Proactive planning means you have more control over that impact and creativity with your financial decisions.

Although it helps reduce taxes in the future, that’s not the only benefit of tax planning and may not even be the most valuable. When you plan ahead and consider what is coming down the road, you can take steps to increase flexibility in your income plan and keep your investments running smoothly.

A financial plan is not complete without a comprehensive tax plan, and your plan is only fully customized if it includes a tailored tax strategy. We hope these five key questions give you a glimpse into how your current advisor considers your tax situation and can help you feel confident going into year-end.

Covenant Wealth Advisors is an independent, fee-only, fiduciary wealth management firm. This means through our fee structure and legal duty, we actively avoid and reduce conflicts of interest to give you financial advice that truly is in your best interest.

Our team holds certifications and education like certified financial planners (CFPs), CPAs, and other financial services designations that help us serve you best.

Contact us today to get started on your tax plan. Some opportunities are only available until the end of the calendar year, and we want to ensure you don't miss out on anything that could help you improve your tax and financial situation.


Scott Hurt, CFP®, CPA

Scott is a fiduciary, fee-only financial advisor at Covenant Wealth Advisors serving clients across the United States. He specializes in helping individuals aged 50 plus create, implement, and protect a personalized financial plan for retirement.



Covenant Wealth Advisors is a registered investment advisor with offices in Richmond and Williamsburg, VA. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital.

The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content is for educational purposes and contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.

Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place.


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