Situation: A prospect had recently sold a service company that was eligible for enterprise zone tax credits as a result of doing business in certain inner-city neighborhoods. These tax credits remained with the former owner even after he sold the business.

Opportunity: Burt Wealth Advisors understands the most effective ways to apply tax credits.

Solution: Burt Wealth Advisors analyzed the situation and proposed a strategy that would effectively use the tax credits to save on taxes now as well as in the future. By working with the client’s CPA, we formulated a plan to convert some of the client’s regular IRAs to Roth IRAs at a significantly reduced tax rate. The enterprise zone credits did not fully offset taxes on the Roth conversion but resulted in an effective tax rate of about 20%. The client’s normal marginal tax rate was 35% so the strategy saved 15% in taxes on several hundred thousand dollars worth of taxable income at conversion. The client had other significant assets to pay the taxes and thus was able to convert a sizable IRA with the intention of leaving an inheritance to his children.