Among all the topics that come up in discussion with clients, few register higher on the pain-meter than taxes, but it doesn’t have to be that way (how we feel, and what we do about it).

Naturally, the emotional reaction to something being taken away from us isn’t positive.

And much of this is because we don’t feel like we have a choice when it comes to taxes, but that is only partly true.

Of course, tax rules are prescriptive, which means we have no choice but to follow them.

But this loses sight of three larger factors at play.

Taxes are a symptom of producing income

The first is that if we have a tax liability, it’s a sign that we produced income, which is surely positive.

And for some taxes, like a gain on investments, the size and timing of when they occur is within our control.

Managing investment gains is as much about considering tax consequences as it is selling at an attractive price

That’s why investment decisions based solely on taxes don’t necessarily deliver good investment value, but those made without consideration of tax consequences aren’t ideal either.

Successfully harvesting investment gains, on the other hand, is all about finding balance between the two, along with how much of your money may be tied up in an investment, and for how long.

Tax refunds are the result of overpayment

It’s also common that people make the wrong inference from receiving a tax refund.

Hint: they are bad.

Yes, you heard that right. And here’s why…

Much in the same way that a tax liability is preceded by successfully producing income, a tax refund is preceded by overpaying taxes to the government.

That’s why it’s odd to see people celebrate winning back money that was theirs all along, which they could have spent, saved, or invested for the better part of a year.

When John F. Kennedy made his “what you can do for your country” speech, I don’t think that providing interest-free loans to the government was what he had in mind.

That’s why when it comes to taxes, it pays to be a conscientious objector.

You have to follow the rules, and the goal is to be as efficient as you can be given the information you have at the time.

It’s still early days in 2021, and 2020 set a very low bar, so it’s a great time to start planning what changes you can make in your financial life for a better year.

If you’ve got big plans, or want to know what you can do differently, let’s talk.

This blog was written by Jeremy Bohne, Principal & Founder of Paceline Wealth Management. Paceline is a fee-only investment advisor serving clients in the Boston area, and on a remote basis throughout the country. Paceline specializes in helping tech and biotech executives, physicians, and those seeking financial planning services.