Avoiding Tax Surprises | Staying the Course Worked Again

TAX SURPRISES: One of the best measures of successful tax planning is a lack of surprises each April (tax season). This is an area where we commonly meet families that are underserved by their current advisory team. There is a window between now and the end of the year where we can:

Assess the various sources and amounts of income for the year
Minimize high tax bracket exposure
Capitalize on below-average income and low tax brackets
Address liquidity, upcoming planned spending, or Q1 tax bills
Consider the tax advantages of bunching* and the use of a Donor Advised Fund (DAF)

*Bunching (or clumping) is a tax strategy where you consolidate multiple years of charitable donations into a single year to exceed the standard deduction threshold, then take the standard deduction in the “off” years. This allows you to claim itemized deductions when bunching, while simplifying your taxes in other years.

Proactive communication and professional collaboration directly contribute to your financial success. If you know someone who has been surprised by their April tax bill, pass this along.

2025 CHANGES TO INHERITED IRAS: Starting in 2025, certain non-spouse heirs to Inherited IRAs will be required to take required minimum distributions while emptying the account over 10 years’ time, according to a new IRS rule. If qualifying heirs don’t make the proper withdrawal, they could face a 25% penalty on the amount they should have withdrawn. Even if RMDs don’t apply to your inherited IRA for 2025, most heirs still must deplete the account in 10 years. Reach out to your tax accountant for specifics, or give us a call to see how we can help with your Inherited IRA.

REMEMBER THE “TARRIFF TANTRUM”: Fear never drives successful investment outcomes. Your short-term cash needs should never be invested.

WHAT’S NEXT?: November and December in post-election years are historically “up.” We continue to see elevated inflation, and the Fed is cutting rates.

HUMANS ARE AMAZING: Human skill and ingenuity will never cease to amaze us. File this in the “interesting things humans can do” category.

*The views expressed represent the opinions of Compass Ion Advisors, LLC, as of the date noted and are subject to change. These views are not intended as a forecast, a guarantee of future results, an investment recommendation, or an offer to buy or sell any securities. The information provided is of a general nature and should not be construed as investment advice or to provide any investment, tax, financial, or legal advice or service to any person. The information contained has been compiled from sources deemed reliable, yet accuracy is not guaranteed.

Additional information, including management fees and expenses, is provided on our Form ADV Part 2 available upon request or at the SEC’s Investment Adviser Public Disclosure website here. Past performance is not a guarantee of future results.