Tax planning tips for financial advisors

For most people, April 15^th is synonymous with filing tax returns. For CPAs, it marks the culmination of months of work. But for financial advisors, Tax Day can serve a different purpose: a valuable checkpoint.

While you may not be preparing your clients’ returns, the decisions you help them make throughout the year often have as much—if not more—impact on their tax outcomes than the filing process itself. Investment strategy selection, asset location, tax-loss harvesting, charitable giving, and retirement withdrawals can all materially shape a client’s tax picture.

With April 15^th approaching, it’s a good time to revisit several key tax themes with clients.

1. How to use tax refunds in financial planning

Following the passage of the One, Big, Beautiful Bill Act (OBBBA), many taxpayers are seeing larger refunds this year, with early IRS data showing refunds up more than 10% in 2026, according to recent IRS data.

While the amount may not always be large relative to a client’s overall portfolio, the conversation still matters. Is the refund simply being spent, or could it be reinvested in a taxable portfolio? Even modest amounts can reinforce disciplined financial behavior and long-term planning habits.

2. RMD Strategies: Where should distributions go?

Many retirees take Required Minimum Distributions (RMDs) each year. Once the distribution is taken, the next question is: where should those dollars go? Some clients may need the income, but others do not. Reinvesting RMDs in a tax-managed approach can help maintain portfolio alignment and manage future tax exposure. If the funds aren’t needed, they shouldn’t sit idle in cash. The requirement for distribution does not mean the amount has to be spent.

3. Estate planning and current tax exemption levels

The OBBBA made the estate tax exemption threshold permanent (recognizing that permanence in Washington is always subject to change) at roughly $15 million per taxpayer, indexed for inflation. This creates improved estate planning and continues to create significant wealth transfer opportunities. Advisors should ensure that clients who may be affected are at least engaging in conversations with estate planning professionals.

4. Using capital loss carryforwards in tax planning

Tax returns often reveal valuable information for future planning—particularly capital loss carryforwards. These losses can offset future gains and become especially useful in years when portfolios are rebalanced or concentrated positions are reduced. Many taxpayers are unaware whether they have these tax assets available.

A quick review of the prior year’s return—specifically Schedule D, lines 7, 15, and 16—can uncover opportunities that may otherwise be overlooked and see what tax assets might be available for future planning.

5. Tax-loss harvesting in volatile markets

Year-to-date market returns are a reminder of the inherent volatility that comes with investing. While volatility is rarely welcome—especially on the downside—it can create planning opportunities. Down markets may allow tax-loss harvesting, while strong markets can sometimes justify selective gain harvesting if clients are in lower tax brackets. As always, the key is thoughtful analysis and understanding the broader portfolio impact.

6. Health savings accounts (HSAs): Are they being invested?

HSAs remain one of the most tax-efficient vehicles available: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. Yet many clients leave HSA balances in cash. For long-term planners, investing these funds can transform an HSA into a powerful supplemental retirement asset. Advisors can look for Form 8889 in a client’s tax return to confirm HSA activity. The benefits of compounding are particularly meaningful in these accounts.

7. Helping clients understand taxes and investment decisions

In a 2024 Tax Foundation survey of 2,700 taxpayers, 51% of respondents said they do not understand how tax brackets work. See our waterfall charts below to help illustrate the interaction between earned income, short-term unearned income, and long-term unearned income. Use this in client conversations to help them understand how investment decisions impact their tax bill.

How tax brackets work
THE PROGRESSIVE NATURE OF INCOME TAXES

WHAT TO KNOW:

• You have to fill up each ‘bucket’ before you go to the next tax rate.
• Unearned income STARTS where earned income ends.
• The extra 3.8% tax on unearned income is tied to the Net Investment Income Tax (NIIT).
• The rate of the highest bucket for income is your marginal tax rate (the tax rate on next dollar earned).
• Because your income progresses through the multiple tax brackets, the overall – or effective – tax rate is generally lower than the marginal rates. Effective tax rate = Total Income Taxes Paid / Taxable Income.
• A taxpayer can have different marginal tax rates but only one effective tax rate.

2026 Tax Rates/Married Filing Jointly.
*$250,000 reflects Modified Adjusted Gross Income (MAGI) and not Taxable Income.
The Net Investment Income Tax of 3.8% is based on MAGI – not Taxable Income.

Let’s take a look at an example
TAXABLE INCOME OF $610,000 = $510,000 ORDINARY INCOME + $20,000 STCG + $80,000 LTCG

WHAT TO KNOW:

• Be aware of remaining dollars in each bucket to make tax-smart, informed decisions.
• Investors generally do not have much control on timing of W-2 income but do have some control over the timing and character of unearned income.
• Could gain/loss realization be deferred into future years? Pulled forward?

2026 Tax Rates/Married Filing Jointly. *$250,000 reflects Modified Adjusted Gross Income (MAGI) and not Taxable Income. The Net Investment Income Tax of 3.8% is based on MAGI – not Taxable Income. Important Disclosure Information: This information has been prepared by Frontier based on data and information provided by internal and external sources. While we believe the information provided by external sources to be reliable, we do not warrant its accuracy or completeness. Nor should their use be construed as an endorsement. Frontier does not provide tax advice. Please consult with a CPA for recommendations pertaining to individual circumstances 2026 Tax Rates/Married Filing Jointly.

8. The advisor’s role

Tax Day may belong to the CPA, but tax planning belongs to the entire advisory team.

The conversations advisors initiate throughout the year—around withdrawals, asset location, rebalancing, and savings strategies—can have a lasting impact on a client’s tax outcome.

At Frontier, we have partnered with advisors for over 25 years to manage clients’ taxable assets. Our team works alongside advisors to help win new accounts, retain existing relationships, and win assets held away. It’s what we do.

April 15th is simply a reminder to take stock and ask:
What tax opportunities might exist for the year ahead?

Key Takeaways:

• Tax Day is a valuable checkpoint for financial advisors to revisit client tax strategies.
• Tax refunds can be reinvested to support long-term financial planning.
• RMDs do not need to be spent and can be reinvested strategically.
• Capital loss carryforwards can offset future gains and improve tax efficiency.
• Market volatility creates opportunities for tax-loss harvesting.
• HSAs offer triple tax advantages and can be used as long-term investment vehicles.
• Advisors play a critical role in coordinating tax-aware investment decisions.