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26 HARTFORDBUSINESS.COM | JUNE 10, 2024 EXPERT'S CORNER Tax planning tips for executives and business owners By James Zahansky I t's crucial for executives and busi- ness owners to proactively plan and strategize to minimize their tax liabilities. By implementing effective tax plan- ning strategies, you can potentially save thou- sands of dollars and maximize your financial resources. Here are some top tax-saving tips that executives and business owners should consider for the upcoming tax year. 1. Maximize retirement contributions One of the most effective ways to reduce your taxable income is to maxi- mize contributions to tax-advantaged retirement plans. As an executive or business owner, you have access to various retirement savings options, including 401(k) plans, traditional IRAs and defined benefit plans. These contributions are typically tax-deductible, lowering your overall taxable income for the year. 2. Leverage business deductions Running a business comes with numerous expenses, many of which may be tax-deductible. Ensure you are taking advantage of all eligible deductions related to your business expenses, such as travel, meals and entertainment (subject to limitations), home office expenses, vehicle expenses and other business-related costs. Properly documenting and deducting these expenses can signifi- cantly reduce your tax burden. 3. Establish an accountable plan Implementing an accountable plan for reimbursing employee business expenses can provide tax benefits for both you and your employees. Under an accountable plan, you can deduct these expenses as a business owner while keeping them tax-free for your employees, creating a win-win situation. 4. Explore tax credits Various tax credits are available to businesses, such as the research and development (R&D) tax credit, work opportunity tax credit or industry-spe- cific credits. These credits can directly reduce your tax liability, making it essen- tial to understand and take advantage of any credits that apply to your business. 5. Time income and expenses strategically Carefully timing the recognition of income and expenses can be a powerful tax planning strategy. By shifting income or expenses into a more favorable tax year, you may be able to capitalize on expected changes in income or tax rates, potentially reducing your overall tax liability. 6. Implement tax-efficient investment strategies Develop tax-efficient investment strategies tailored to your unique circumstances. Techniques such as tax-loss harvesting, maximizing qualified dividends and long-term capital gains, and utilizing tax-ad- vantaged accounts like 529 plans or health savings accounts (HSAs) can help minimize your tax burden while growing your wealth. 7. Evaluate business structure The structure of your business (e.g., sole proprietorship, partnership, corpo- ration) can have significant tax impli- cations. Determine whether a different business structure could provide tax advantages based on your specific circumstances and goals. 8. Defer compensation If you are an executive or highly compensated employee, exploring opportunities to defer a portion of your compensation to future tax years when you may be in a lower tax bracket can potentially result in substantial tax savings. 9. Make charitable contributions Charitable contributions, whether in cash or appreciated assets, can provide valuable tax deductions while supporting causes you care about. Additionally, donating appreciated assets can help you avoid paying capital gains taxes on the appreciation. 10. Implement estate planning strategies As an executive or business owner, it's essential to have a comprehensive estate plan in place. Implementing strategies such as trusts, gifting or other techniques can help minimize potential estate and gift taxes, ensuring your wealth is preserved and transferred efficiently to your intended beneficiaries. James Zahansky is a principal/ managing partner, investment advisor and chief goals strategist at wealth management firm Weiss, Hale & Zahansky Strategic Wealth Advisors. This column is general in nature and does not address a specific situation. For specific investment needs, please discuss indi- vidual circumstances with your represen- tative. Weiss, Hale & Zahansky Strategic Wealth Advisors does not provide tax or legal advice, and nothing in this column should be construed as specific tax or legal advice. EXPERT'S CORNER Here's how endowment managers can get the most out of their investment policy statement By Greg Miller S erving on a board of an organiza- tion supported with endowments can be a wonderful experience. The hospitals, churches, social service providers and other nonprofit organizations that rely on these generous gifts for a portion of their funding do great work, and the volun- teers who sit on their boards and investment committees make important decisions that affect the organi- zation today and into the future. Overseeing an endowment is unlike most other financial responsibilities. For those who join an investment committee, the challenges quickly become apparent: complying with gift restric- tions, balancing current needs with those years in the future, adhering to good governance, and fulfilling one's fiduciary duties. An investment policy statement (IPS) is an important first step for an organi- zation to meet its responsibilities. While every IPS is as unique as the organization it helps guide, there are a few things to consider that can help organizations get the most out of their endowments. What is an investment policy statement? The IPS is a document that links endowment assets and how they are managed with the mission of the organization. Stripped to its bare essentials, it serves as the mandate for your investment manager and provides parameters that can be used as a report card for the investment manager. The primary components of any IPS include the organization's invest- ment goals, a framework for asset allocation and a spending policy. In addition, the IPS is the place to desig- nate roles and responsibilities, and a schedule for regular rebalancing, as well as the benchmarks by which progress should be measured. Some organizations may also include a section on restrictions or prohibitions, dictated by rules around certain gifts or a values' statement. There is a lot to consider, and much of it is governed by the Uniform Prudent Management of Institutional Funds Act. Who knew you had to understand statutes to volunteer with a nonprofit organization? Meeting investment goals The first question is: Can you get there from here? Are your investment strategies likely to achieve the required returns, and generate sufficient returns to meet the organization's needs? Is it reasonable to expect the assets to grow over time to offset inflation for future beneficiaries? Sometimes, the answer is no. For instance, I worked with an organization recently whose invest- ment goals were substantially higher than could be reasonably expected from their very conservative invest- ment strategy. A range of alternatives were considered, and they ultimately reduced their expected return and modified their strategy to one likely to earn higher returns over time. Roles and responsibilities IPSs should also describe roles and responsibilities of everyone who is involved. Has the board delegated authority to the investment committee to make changes? What is the scope of that authority and what communica- tion does the board expect to get? If the investment committee engages a professional to help with investing, does that professional have discretion? Are they a consultant? Simply stated, a well-drafted IPS leaves no questions about who is responsible for what. By clearly defining roles and addressing the unique needs of the organization, the IPS brings continuity to an organization. You may have just joined the investment committee, but at some point in the future, someone will replace you. A well-drafted IPS demonstrates why you and others have done what you have. Not every IPS is the same. Some organizations require many pages, while others work well with a two-page document. In both cases, the state- ment should be painstakingly crafted and reviewed periodically. A well-drafted policy should endure typical market fluctuations, but when the needs and goals of the organiza- tion change, the policy might require modification to reflect them. Greg Miller is a portfolio manager at Hartford-based registered investment advisor Bradley, Foster & Sargent. James Zahansky Greg Miller FOCUS | WEALTH MANAGEMENT