Tax Strategy Engine

Year-round, portfolio-aware tax intelligence. This skill does NOT file taxes — it provides proactive strategy to minimize lifetime tax burden through smart sequencing of investment decisions, account selection, and income timing.

What TurboTax Cannot Do (Our 10x Advantage)

TurboTax is a form-filler. It asks "what happened?" and fills in boxes. This skill asks "what SHOULD happen?" and tells you the optimal sequence.

Key differentiators:

• Portfolio-aware: knows your holdings, gains, losses, and account types
• Forward-looking: models tax impact of proposed trades BEFORE execution
• Multi-year: optimizes across years, not just current filing
• Strategy-first: starts with goals (minimize tax, maximize Roth, defer gains) then works backward to specific actions

Core Capabilities

1. Tax Bracket Management

Read references/bracket-optimization.md for current brackets and strategies.

Analyze the user's income situation and identify:

• Current marginal bracket and distance to next bracket
• Opportunities to "fill up" lower brackets (Roth conversions, capital gains harvesting)
• Income spikes to manage (RSU vesting, bonus, stock sales)
• Strategies to smooth income across years

2. Account Placement Optimization (Asset Location)

Read references/asset-location.md for the decision framework.

Determine optimal placement of each asset across account types:

• Taxable brokerage: tax-efficient assets (index funds, growth stocks held long-term, municipal bonds)
• Roth IRA: highest-expected-growth assets (tax-free gains forever)
• Traditional IRA / 401k: income-generating assets (bonds, REITs, dividend stocks)
• HSA (if eligible): maximum growth assets (triple tax advantage)

3. Roth Conversion Strategy

Evaluate whether and how much to convert from Traditional IRA → Roth IRA:

• Calculate the "Roth conversion sweet spot": income level where conversion fills current bracket
• Model the break-even horizon (how many years until Roth beats Traditional)
• Factor in: current bracket, expected future bracket, RMD age, estate planning goals
• Mega Backdoor Roth: check employer plan eligibility, calculate maximum contribution

4. Investment Decision Tax Modeling

Before ANY sell/buy decision, model the tax consequence:

• Short-term vs long-term capital gains impact
• Net Investment Income Tax (NIIT) threshold: $200k single / $250k married
• Alternative Minimum Tax (AMT) exposure (especially for ISO exercises)
• State tax implications
• Wash sale rule compliance
• Estimated quarterly tax payment adjustments needed

5. RSU / Stock Option Strategy

Read references/equity-comp-tax.md for detailed strategies.

For tech workers with equity compensation:

• RSU vesting tax modeling (ordinary income on vest date)
• ISO vs NSO exercise strategy
• AMT planning for ISO exercises
• 83(b) election analysis for early-stage startups
• Diversification strategy that minimizes tax friction
• Donor Advised Fund (DAF) strategy for appreciated stock

6. Advanced Strategies

Read references/advanced-strategies.md for detailed guidance.

Surface strategies most people miss:

• Qualified Small Business Stock (Section 1202): up to $15M gain exclusion
• Qualified Opportunity Zone (QOZ) investments: capital gains deferral
• Charitable giving of appreciated stock to DAFs
• Harvesting gains at 0% rate (if in low bracket)
• Tax-gain harvesting (yes, sometimes realizing gains is optimal)
• Net unrealized appreciation (NUA) for company stock in 401k
• Series I Bond tax deferral strategies

7. Year-End Tax Checklist

Generate a personalized year-end tax action list:

• Remaining Roth conversion space
• Tax-loss harvesting sweep
• Charitable giving deadline (Dec 31)
• 401k/IRA contribution deadline check
• Estimated tax payment review
• Flexible spending account use-or-lose deadline
• RMD compliance (if age 73+)

Process

1. Gather tax profile: filing status, income sources, marginal bracket, state
2. Connect to portfolio: use holdings data from portfolio-health-check or user input
3. Identify opportunities: run all 7 capability checks
4. Rank by impact: sort by estimated dollar savings
5. Generate action plan: specific, sequenced, deadline-aware actions

Output Format

TAX STRATEGY REPORT — [Year]

ESTIMATED CURRENT TAX LIABILITY: $XX,XXX
POTENTIAL SAVINGS IDENTIFIED: $X,XXX — $XX,XXX

IMMEDIATE ACTIONS (do this week):
1. [Action] — saves ~$X,XXX — [deadline if applicable]

THIS QUARTER:
2. [Action] — saves ~$X,XXX

YEAR-END:
3. [Action] — saves ~$X,XXX

MULTI-YEAR PLANNING:
4. [Action] — saves ~$XX,XXX over X years

DETAILED ANALYSIS:
[Section for each strategy with full reasoning]

Profile Integration

Before starting analysis, check for the user's financial profile:

1. Read profile/financial-identity.md for tax bracket, filing status, age, state, and full identity details
2. Read profile/holdings.md for location of holdings across account types (affects asset location strategy)
3. Read profile/goals.md for planning horizon and savings targets

If profile exists:

• Use stored tax profile to avoid re-asking for bracket, filing status
• Reference holdings to provide asset location recommendations
• Use goals to identify tax optimization priorities
• Check for Roth conversion eligibility based on known income

If profile doesn't exist, proceed normally and offer to save:

• Tax filing status and marginal bracket
• Current account balances across account types
• Target contributions and savings strategy for the year

After completing analysis, append a summary to profile/history.md:

## [Date] — Tax Strategy
- **Action**: [Type of strategy planning - annual, specific decision, etc.]
- **Key findings**: [Opportunities identified, estimated tax savings, risk areas flagged]
- **Recommendations**: [Top actions ranked by impact, deadlines, next steps]

After presenting strategies, offer: "Want a Tax Alpha card showing the optimization opportunities found?"

Critical Disclaimers

• This is tax education and analytical modeling, NOT tax advice
• Tax situations are highly individual — always verify with a CPA or tax attorney
• Tax laws change frequently — verify current rules before acting
• State tax rules vary significantly and may override federal strategies
• For portfolios >$500k or income >$250k, professional tax planning is strongly recommended