5 Insights from Michael Kitces on Tax Planning in 2025

Tax planning has always played a role in financial advising, but in recent years, it has evolved from a secondary service to a core component of comprehensive financial planning. As clients demand more tangible, immediate value, advisors are shifting their approaches—moving beyond basic tax strategies to proactively analyzing tax returns, optimizing Roth conversions, and implementing tax-efficient withdrawal strategies.

At RightInsights, RightCapital’s inaugural virtual event held in February 2025, Michael Kitces (Chief Financial Planning Nerd at Kitces.com) shared his expertise. He dove into why tax planning is an important service for financial advisors and how to integrate it effectively into your practice. From overcoming compliance concerns to leveraging technology for real-time tax analysis, Michael outlined the key trends shaping the future of tax planning:

1. Tax planning is evolving for financial advisors

Michael Kitces: But now as advisory firms are getting more and more comprehensive in what they're doing, the biggest distinction I see is firms starting to do is just sort of literally planning for your tax obligations unto itself, which is usually not about the particular thing, the insurance or the investments or the business. It's literally about pulling out the tax return and looking at the tax return and saying, here are some opportunities we can find where we might be able to do more planning for you.

So we see more advisors delving into tax returns. Obviously you guys rolled out Tax Analyzer from RightCapital, and we built a course last year on how to actually go through a client's tax return line by line. And that to me is the biggest shift.

So when we look at our research data around how many advisors say they do tax planning, more than 90% say they've been doing tax planning, and more than 90% have said they were doing tax planning every time since we've been doing the study for about eight years.

But the nature of the tax planning, I think, is different. We've gone from, I do tax planning around what I'm implementing for you, to this realm of, no, I'm literally going to pull out your tax return and see if I can find some opportunities and ideas that might lay some additional value on you.

While tax-planning has traditionally been included in financial advising (for example, when it comes to taxes related to annuities or tax-deferred insurance products), as the depth and breadth of planning has grown, there has also been a shift in what tax-planning actually entails. Michael pointed out, “The nature of tax planning now is different. We've gone from, ‘I do tax planning around what I'm implementing for you’ to this realm of ‘I'm going to pull out your tax return and see if I can find opportunities and ideas that might lay some additional value on you.’”

Michael Kitces quote, "The improvements in the tools have made it easier to go from ‘tax planning is just something we do in that upfront plan’ to ‘tax planning is an annual touchstone in the fourth quarter, with every client."

Michael touched upon several ways advisors are including tax planning into their offerings. 16% of firms are providing actual tax preparation services, but you can include it in other ways, such as the more traditional approach of considering taxes while implementing a new product, or opportunities identified during comprehensive financial planning such as Roth conversions or tax-efficient distributions.

With all that said, Michael is seeing the majority of the shift is seen in the following situation: “The place we're really seeing the growth is the movement from tax planning attached to the product to tax planning attached to the financial plan to tax planning attached to some kind of client service calendar that says we're going to do this as part of our end-of-year process for you every year,” which is a way advisors can show their value on an annual basis. Michael also notes that the improvements in financial planning tools have made it easier to increase the tax planning from what may have been done during the initial plan to something more ongoing.

2. Tax planning demonstrates tangible benefits

Michael Kitces: So much of the challenge around what we do in financial planning feels like something to the effect of, we're going to give you all this great advice and 30 years from now you are so going to thank me for this. And I don't really get to prove it until you actually get to retirement and go, wow, this retirement is amazing. Thank you, Michael, for working with me over all these years.

Whereas when we sit down with tax planning, we actually sometimes get the opportunity to say, we're going to do all this stuff to help you have a secure retirement years and decades from now. You're going to look back and thank me, but I would just like to point out to you that I literally saved you $3,722 in actual taxes last year by finding this opportunity on your tax return.

And there is something, I think, about the concreteness of hard dollar tax savings. That also becomes a lot more appealing in a financial planning world. We tend to go more comprehensive as financial planners, but we also tend to go even more intangible, and tax planning becomes one of these super tangible, like, I saved you this.

It may take decades for the results of long-term financial planning to come to fruition and Michael notes the more comprehensive financial planning becomes, the more intangible it can become as well. He quipped, “I don’t really get to prove (my worth as an advisor) until you actually get to retirement and go, ‘Wow! This retirement is amazing. Thank you, Michael, for working with me over all these years.’”

In comparison, tax planning provides immediate, measurable benefits, helping advisors strengthen client relationships and justify their fees. Michael noted he can share with clients, “‘I would just like to point out to you that I literally saved you $3,722 in actual taxes last year by finding this opportunity on your tax return.’ There is something about the concreteness of hard-dollar tax savings that also becomes a lot more appealing…tax planning becomes one of these super tangible things like "I saved you this (amount of money).”

3. Financial advisors can legally offer tax planning

Michael Kitces quote, "We're not trying to do the ‘big T big A’ Tax Advice thing that CPAs do. We're doing ‘little t, little a’ tax advice."

Michael acknowledged that in some larger firms, advisors have traditionally been discouraged from offering tax advice, but he also notes an important distinction between what he calls “Big T, big A ‘Tax Advice,’” which is what CPAs do, versus “Little t, little a ‘tax advice.’” The latter is “recommendations to improve clients’ tax situation and arrange affairs in a way that will reduce tax liabilities, because that's a flat out value I can provide. That usually helps me reinforce the relationship.” By recognizing this difference, advisors can avoid compliance concerns while still bringing value to the table for clients.

4. Asset location strategy can help advisors and clients

Michael Kitces quote, "No two asset location solutions end up being entirely the same, because each client has their own financial situation, and each advisor has their own investment style of what they buy, what they hold, what they trade or not."

Asset location is a lesser-known tax-efficient investment strategy that focuses on where different types of investments should be placed across various account types to maximize after-tax returns. Most investors have three main types of accounts—taxable, tax-deferred, and tax-free—all with different tax characteristics.

Traditionally, many investors and advisors mirror the same asset allocation across all accounts (e.g., maintaining a 60/40 stock-bond split in each account). However, a more tax-efficient approach is to manage investments at the household level instead of at the account level, reducing tax liability and enhancing long-term returns.

Many modern financial planning platforms now include built-in asset location tools, allowing advisors to strategically allocate investments across multiple accounts while ensuring the overall portfolio maintains the desired risk and return profile. For financial advisors, leveraging technology-driven asset location strategies can provide a competitive edge and deliver greater value to clients.

5. Technology makes tax planning easier

Michael Kitces: And to me, that's where a long time ago we would try to do this with spreadsheets, with some level of pain. Now, increasingly, we can do it in financial planning software where we can literally model out: I'm going to make sure that we always fill the 12% tax bracket in your sixties, or we're going to fill you right up to the 22% tax bracket in your sixties. And look, if we do that, look out in the later years, you never hit the 30% brackets. You never get to the 32 because we smooth it out enough to keep you in 24 for life. And if you're in 24% for life and you're never in 32, I just saved you 8% of your balance. You couldn't do that math pretty quickly.

And often the software will just outright project: here's how much final after-tax wealth you've got in scenario A, here's how much final after-tax wealth you've got in scenario B. B is better than A because my recommendations are helping you.

So I always felt like this was a two-tiered thing. There's an educational principle to help clients understand why you're making certain recommendations in trying to manage their tax affairs in a certain way. And then there's pulling out the software to say, now let me try to actually quantify this, because I can't do multi-account compounding with systematic withdrawals, coordinated with Social Security and Medicare, in my head. At some point we just need a calculation engine to do this and get to the numbers. And that's where planning software comes in today, to say, now let me try to quantify this for you a little bit.

And I've always and forever been a fan of, look, here's scenario A, here's scenario B. Let's look at the difference between the two. A is what you're doing now, B is what I'm recommending, and we can start to quantify what this difference looks like over life.

Financial planning software has made it easier to model tax-efficient withdrawal strategies, Roth conversions, and asset location. Advisors are leveraging these tools to provide data-driven, visual insights that help clients understand tax strategies. Michael noted, “A long time ago we would try to do (tax planning) with spreadsheets, with some varying level of pain. Now, increasingly, we can do it in financial planning software…at some point we just need a calculation engine to do this and get to the numbers.” He spoke about the convenience of being able to show multiple scenarios to show how much money a client could save by changing their strategy.

Disclaimer: This article is intended to provide educational insights based on Michael Kitces’ presentation at RightInsights. The inclusion of Michael Kitces’ commentary does not imply an endorsement of RightCapital, its products or services by Michael Kitces or Kitces.com. References to tax planning strategies and technology solutions are for informational purposes only and should not be considered financial, tax, or investment advice.

How RightCapital can help with tax planning

In addition to our previous market-leading tax planning offerings such as Roth conversions and tax-efficient distributions, RightCapital has released two big updates over the last year to enhance your tax offering to clients while also saving you time as the advisor.

Tax Strategies, released in late 2024, allows for advisors to summarize important visuals, dive into asset location (as discussed above), and solve for the top five optimal tax strategies with just one click, ultimately strengthening advisor-client relationships. To learn more about this offering, click here.

Tax Analyzer, introduced in early 2025 for Premium and Platinum subscribers, enables advisors to securely upload tax forms and assess tax impacts directly within RightCapital. Upload tax returns, discover tax-smart opportunities, and evaluate the impact on deductions, exemptions, and credits. For more on this feature, visit this page.

If your practice is interested in learning more about RightCapital’s tax-planning tools, schedule a personalized 1:1 demo today. To stay up-to-date on future events from RightCapital, sign up for our newsletter here.