Thursday, July 13, 2017


One of the most important pieces of advice I have seen, and have given, over the years is “Don’t let the tax tail wag the investment dog”.

Do not make investment or financial decisions based solely on tax considerations. For years now I have been saying that the first criteria for evaluating any transaction, strategy, or technique you are considering should always be financial.  Taxes are second. 

Obviously you should be aware of, and take into consideration, the tax consequences of any planned transaction, and try to structure the transaction so that it results in the minimum federal and state tax cost.   

But remember - taxes are only pennies on the dollar.   

When discussing this issue I always tell the following story –

Many decades ago, when I was still an "apprentice" tax preparer, one of my mentor’s clients came in and proudly announced that his employer had offered to reimburse him for job-related mileage, but he turned it down because then he would not be able to deduct business travel on his Form 1040 (back then employee business expenses were deductible in full "above-the-line" as an Adjustment to Income). 

My mentor avoided the temptation to tell the client that he was a complete idiot, and attempted to explain, with great patience and tact, that it is much "more better" for someone to give you $1.00 tax free than it is to be able to save 30 cents by claiming a tax deduction. 

Similarly, there is no benefit in spending $1.00 needlessly to save 30 cents in taxes.  You have not saved 30 cents – you have actually lost 70 cents!  It doesn’t make sense to incur an expense solely because it is deductible.


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