Tax planning is the analysis of one’s financial situation from a tax efficiency point of view so as to plan one’s finances in the most optimized manner. Tax planning allows a taxpayer to make the best use of the various tax exemptions, deductions and benefits to minimize their tax liability over a financial year.
Tax Planning Page
Save on Taxes By Being Proactive Instead of Reactive
You’re looking for deductions related to property tax or mortgage expenses. Or, if you had significant medical expenses tallying more than 10% of your adjusted gross income, you may have yet another potential deduction. In many ways, a bulk of tax preparation is looking back to find these deductions, which can add up to incredible savings for the year.
On the other hand, there is tax planning. Rather than looking back at the past year, tax planning involves looking forward five, 10 or 20 years. When you plan, you consider what you can do to keep your tax burden to a minimum while positioning some of your savings to generate a tax-free income.
Tax Planning for Life’s Major Events
The colossal Internal Revenue Code now reaches into nearly every nook and cranny of our lives, from cradle to grave. A newborn brings tax breaks to his or her parents; death brings a series of tax repercussions; and the IRS has something to say about almost everything in between. The tax bill you owe each spring is based on the working, saving, investing, spending, business and other personal decisions you make during the year.
As your life changes, so does the set of tax rules that affect you. That’s why this compendium of life events is so important — to alert you to new opportunities to embrace and pitfalls to avoid as your life as a taxpayer evolves.
The fact that federal income taxes are among most families’ biggest annual expenditures hammers home the importance of tax planning. Shake off any notion that this is a game for the wealthy. Instead, draw your inspiration for this comment from a high-priced tax attorney: “The best and finest tax planning is done by people who have more money than they’ll ever spend or be able to give away. The worst tax planning is done by nice middle-class people who have middle-class virtues, those who have to work hard and save and sacrifice.” Tax planning will save you money.
- Graduating from college
- Getting your first job
- Birth of a child
- Wokring at home
- Getting married
- Buying a home
- Chanaging jobs
- Major illness or injury
- Selling a home
- Getting divorced
- Death of a spouse