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Q&A: Minimizing your taxes is fine — to a point

July 15, 2024 By Liz Weston

Dear Liz: In reading your columns, one can get the impression that reducing tax liability is the primary objective for many financial advisors. I disagree with this. Paying a fair share of taxes is a responsibility to society and the less fortunate, especially for wealthy people. Why are so many financial “professionals” so obsessed with paying less in taxes?

Answer: Tax planning is an essential part of comprehensive financial planning. No one is under an obligation to pay the maximum tax possible. Those who specialize in tax avoidance love to quote a judge named Learned Hand, who wrote in 1934: “Anyone may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.”

Where advisors — and taxpayers — get into trouble is when they prioritize tax avoidance over all other concerns. That’s how you get advisors doing tax loss harvesting on a financial account to reduce capital gains for an older couple in the 0% capital gains bracket (an example of this behavior from a recent column).

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Filed Under: Financial Advisors, Q&A, Taxes Tagged With: financial advice, financial advisors, Taxes

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