CFP EXAM CHEAT SHEET: Tax & Retirement Planning

TAX PLANNING FUNDAMENTALS

Four Core Strategies:

Deductions — Reduce taxable income

Credits — Dollar-for-dollar tax reduction

Deferrals — Push income to future periods

Shifting — Move income to lower-bracket persons/entities

Marginal vs. Effective Rate:

• Marginal: Rate on *next* dollar (use for decisions)

• Effective: Total tax ÷ total income

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INVESTMENT TAX RATES (2025)

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Tax-loss harvesting: Offset gains with losses. Beware wash-sale rule — can't repurchase substantially identical security within 30 days before/after.

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ROTH vs. TRADITIONAL DECISION MATRIX

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Backdoor Roth: High earners contribute non-deductible → convert. Pro-rata rule: Pre-tax IRA balance makes conversion partially taxable.

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TAX-ADVANTAGED RETIREMENT ACCOUNTS

Contribution Limits (2025)

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Deductibility Phase-outs (2025)

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REQUIRED MINIMUM DISTRIBUTIONS (RMDs)

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QCD (age ≥70½): Direct IRA-to-charity transfer (up to $105K/yr) excluded from income; counts as RMD. No deduction needed.

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TAX CREDITS & DEDUCTIONS

Above-the-Line Deductions (Reduce AGI)

• IRA contributions (if deductible)

• Self-employment tax (50%)

• SE health insurance premiums

• HSA contributions

• Student loan interest

• Educator expenses

Key Deduction Strategies

Municipal Bonds: `` Tax-equivalent yield = Muni yield / (1 − Marginal rate) `` Example: 3.5% muni for 37% taxpayer = 5.56% taxable equivalent.

Appreciated Property Donation:

• Deduct FMV (up to 30% AGI)

• Avoid capital gains tax

• More efficient than sell-then-donate

Donor-Advised Fund (DAF):

• Immediate deduction on contribution

• Grant to charities over time

• Bunching strategy for high-income years

Charitable Remainder Trust (CRT):

• Deduct PV of remainder interest

• Receive income stream

• Defer capital gains

Gift & Estate Tax

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ALTERNATIVE MINIMUM TAX (AMT)

Exemptions (2025 approx.):

• Single: $88,100 (phases out $634K+)

• MFJ: $137,000 (phases out $1.27M+)

Rates: 26% on first ~$232.6K of AMTI; 28% above.

Common triggers: SALT deductions, depreciation, ISO exercise.

Planning: Time ISO exercises; monitor SALT impact.

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RETIREMENT ACCOUNTS: KEY DIFFERENCES

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Income Type	Tax Rate
Short-term capital gains	Ordinary rates (10–37%)
Long-term capital gains (>12 mo.)	0%, 15%, or 20%
Qualified dividends	0%, 15%, or 20%
NIIT (≥$200K single/$250K MFJ)	+3.8% on investment income
Metric	Prefer Roth	Prefer Traditional
Tax rate trajectory	Current < Future	Current > Future
Age	Young (long compounding)	Near/at retirement
Current cash flow	Not needed	Deduction needed
RMDs	None (IRA)	Required age 73+
Account	Limit	Age 50+ Catch-up
401(k)	$23,500	+$7,500 (or +$11,250 age 60–63)
403(b)	$23,500	+$7,500 (+$3K if 15-yr service)
457(b)	$23,500	+$7,500 (stackable with 401k)
SIMPLE IRA	$16,500	+$3,500
SEP IRA	25% comp. or $70K	N/A
Traditional IRA	$7,000	+$1,000
Roth IRA	$7,000	+$1,000
Account	Income Phase-out (Single)	Income Phase-out (MFJ)
Trad IRA (covered by plan)	$79K–$89K	$126K–$146K
Trad IRA (non-covered, spouse covered)	—	$236K–$246K
Roth IRA contributions	$150K–$165K	$236K–$246K
Trigger	Rule
Starting age	73 (→75 by 2033)
Formula	Prior-year balance ÷ IRS Uniform Lifetime Factor
Penalty	25% excise tax on shortfall (10% if corrected timely)
Roth IRA during lifetime	NO RMD
Inherited Roth	10-year rule applies
Item	Amount (2025)
Annual exclusion per recipient	$18,000
Lifetime exemption (individual)	~$13.61M
Portability	Unused DSUE to surviving spouse ✓
Step-up in basis at death	FMV at date of death (avoid cap gains)
Feature	401(k)	SEP IRA	SIMPLE IRA	457(b)
Employer only?	No (employee deferrals)	Yes	No (employee deferrals)	No
Employer contribution	Match