CFP Board Examination Related Question

Q. I plan to sit for the CFP® Certification Examination in 2013, but the information I’m learning uses 2012 tax numbers. How does learning last year’s information affect taking the exam?

A. Because the typical program spans an 18-month period (before a student is finished with the curriculum), there is a very good chance that the tax numbers learned while studying tax planning, will be different when you sit for the exam. Varying and shifting of tax numbers and investment concepts are the norm, not the exception, and will impact both your financial planning education and your professional practice.

Be careful of thinking that you should “put off” your learning until the “new tax numbers become available.” This is a mental trap! Students still need to learn all of the issues and principles that relate to the courses. By way of example, if you know the tax consequences as they relate to a present-value gift exclusion versus a future-value gift in 2012, you will know the taxability in 2013 by adjusting the present interest gift exclusion from $13,000 in 2012 to $14,000 for 2013.

Don’t let last year’s tax figures discourage you from learning the issues and continuing the courses. I recommend resigning yourself to the unfortunate fact that rules and amounts change annually, at a minimum, and that this is an integral part of financial planning.

Posted by Boston Institute of Finance

How Annual Tax Changes Can Affect a Student’s Approach to the Bryant Program

Because the typical CFP program spans an 18-month or more period (before a student is finished with the full curriculum), a common question that many students ask is this: “Why should I take a tax, retirement, or estate tax course with 2013 information if I will sit for the exam in 2014 and use 2014 numbers?”

This is a trap! Students need to learn and understand all the issues and principles relating to the courses, regardless of the tax year. When a student understands that the Roth IRA allowable contribution phase-out for joint filers is indexed for inflation, it is easy to then apply the rules from one year to the next after the index amounts change. For example, the 2012 AGI levels of $173,00 – $183,000 were increased to $178,000 – $188,000 for 2013 joint filers.

I recommend resigning yourself to the unfortunate fact that tax rules and allowable amounts are revised annually, at a minimum, and that these constant changes are an integral part of financial planning.

Posted by Boston Institute of Finance