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I recently worked with a client on a tax planning strategy that perfectly illustrates the power of proactive financial planning. The client owned a rental property and was approaching the five-year deadline for the Section 121 exclusion, which allows homeowners to exclude up to $250,000 in capital gains if they’ve lived in the property for at least two of the last five years. After reviewing their situation, I realized that selling before the deadline would save them $33,000 in capital gains taxes. We worked together to make it happen, and they successfully sold the property just weeks before the cutoff. This experience reinforced how crucial it is to time financial decisions strategically, especially when considering income fluctuations and long-term goals. Tax planning isn’t just about looking back—it’s about thinking ahead and making informed choices that align with your future. Too often, tax preparers focus on past filings, but I believe in looking through the windshield, planning for the next five to ten years. This case was a great example of turning financial goals into action through smart, forward-thinking tax planning.
Key Takeaways:
• Proper tax planning can lead to significant, measurable savings for clients.
• Understanding whether gains are taxed as ordinary income (short-term) or at lower capital gains rates (long-term) is essential in tax planning.
• Rather than reacting to past tax years, forward-thinking tax planning helps optimize future financial outcomes.
• While tax savings are important, financial decisions should ultimately align with personal goals, not just tax benefits.
• Good planning integrates tax strategy, investment choices, and long-term goals to create a cohesive financial plan.
Key Timestamps:
(00:00) – Client Case Study: Saving on Taxes
(01:43) – Timing the Sale for Maximum Tax Benefits
(03:16) – Details of Section 121 Exclusion
(03:26) – Additional Considerations for Military Members
(05:01) – Proactive Tax Planning Strategies
(05:56) – Final Thoughts and Takeaways
Key Topics Discussed:
BLUF Veteran Finance Podcast, Military Finance, Veteran Financial Planning, Military Money Management, VA Benefits, Military Retirement Planning, Financial Literacy for Soldiers, Military Budgeting Tips, Debt Management for Service Members, VA Loans, Military Investment Strategies, Saving for Deployment, Thrift Savings Plan (TSP), Transitioning to Civilian Life, Military Tax Benefits, Financial Independence for Veterans, Military Money Manual, The Military Money Show
More of Baskin Financial Planning:
Download the Ultimate Military Finance Checklist, with 7 pages of critical things to be thinking about to clarify your journey to financial freedom.
Think you might need some financial help? Book an intro call with me to see if we would be a mutual fit.
Questions or comments, drop me a note at: erik@baskinfp.com
www.baskinfp.com/post/64
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