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Whitewater & Taxes

Whitewater & Taxes

| April 06, 2015

In 2007 my family bought our first whitewater expedition raft and we now have several boats and have gone on at least one wilderness river trip per year since then including our favorites the Colorado through the Grand Canyon 3 times and the Middle Fork of the Salmon 3 times. For the first few years trips were stressful for all of us. I was still learning how to run rivers and how to rig the boat and our camp. Especially stressful were the mornings when we were packing up camp and rigging for the day of whitewater. I took it upon myself to do most of the work as it did not seem possible to get it done as fast as the other captains and teach my family how to help at the same time.

Over time I became a more proficient captain and taught my family and invited friends everything that I learned. I also started getting invited on trips with truly world-class private boaters and with their help was able to upgrade my gear and methods and minimize wasted time and energy. By the time I led our 18-day Grand Canyon expedition last June our kids who were then 12, 15, and 17 were old hands and really embraced the shared-mission aspect of running a logistically demanding and long wilderness whitewater trip. They were valuable crew members who could perform all the essential tasks as well as I including the older 2 rowing the rapids on the Grand Canyon in their own raft.

This year we were planning to raft the Salt River in Arizona with 10 other adults and kids which we have never done. Unfortunately the low snowpack in Arizona and inadequate river flow led to cancelling the trip. I called around and got a permit to raft the San Juan River in Utah but this was later in spring break and none of the original Salt crew could join us so it had turned into a solo trip with me and 4 kids (ours and 1 more).

Almost immediately after getting the permit I got cold feet. We had never done a solo trip which would mean me bringing everything – the 2 boats, medical kit, toilet, stove, propane, firepan, kitchen, all the water and meals. I asked the kids to confirm that they were really committed and they actually seemed insulted that I would ask – OF COURSE was their answer!

This trip turned out to be one of my favorite river trips ever. The weather was great, the kids all got along and were true team players, doing their share of the tasks without complaint or hesitation. We had relaxing days on the water, beautiful hikes including a fun afternoon jumping into the crystal clear pool at Slickhorn Canyon and evenings ended with laughter and conversation around the campfire.

April is the month where we are all acutely aware of income taxes, cost basis, capital gains, and dividends. Often there is a narrow focus on maximizing deductions and minimizing our current income tax without considering how this may impact future taxes. It occurred to me driving home from Utah that this short-sighted approach is similar to what I had done every morning on early river trips scrambling to get all the work done by myself. When I eventually slowed down, asked for help and optimized our gear and methods we were able to confidently launch on more demanding and rewarding trips such as our recent San Juan solo.

Long-term strategic tax planning requires taking the time to optimizing your finances to provide more control over how and when you pay taxes in the future. This may also reduce legislative risk to your portfolio and reduce the overall taxes you will pay should tax rates rise in the future. One interesting question to ask yourself is "how much of my 401k or Traditional IRA balance is really mine and how much will be enjoyed in the future by my two silent partners – the IRS and the Colorado Department of Revenue?"

Everyone's situation is unique but there are some general strategies to consider:


  1. Direct some or even all of your current 401k contributions into Roth to provide future tax-free withdrawals that are not subject to Required Minimum Distributions
  2. Execute a Roth IRA or Roth 401k conversion for the reasons listed above
  3. Minimize portfolio turnover to both reduce transaction costs and minimize unnecessary taxation
  4. Strategically position your assets by account type to put the most tax-efficient assets like tax-free municipal bonds, stocks and low-turnover stock mutual funds and ETFs into taxable accounts and the least efficient assets such as taxable bonds and high-turnover mutual funds into your 401k or IRAs


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