Tax Strategy & Planning

If your goal is to make more money, that’s also likely to conflict with paying less in taxes. The only way to truly win the tax game is to align your strategy with your priorities.

What is a Tax Planning Strategy?

Tax planning analyzes your finances, assets, and liabilities to determine where you might optimize your taxes in the short and long term. There are plenty of variables that come into play!

From timing your income and purchases to planning your expenditures and investments. Even the type of retirement plan you choose must match your holistic financial plan.Tax planning covers several considerations. There are certain tax strategies you should take advantage of, and also some you should avoid. The selection of investments and types of retirement plans must complement the tax filing status and deductions to create the best possible outcome.

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Discover a more in-depth look at how to for your optimal tax strategy.

7 Tax Strategies to Consider

Tax Drag

A tax drag is a reduction of income due to taxes, so ideal tax strategies aim to reduce the tax drag as much as possible to ensure your money has more power to grow.

Charity

Donating appreciated stock can help you avoid capital gains taxes and claim a deduction.

Tax Drag

A tax drag is a reduction of income due to taxes, so ideal tax strategies aim to reduce the tax drag as much as possible to ensure your money has more power to grow.

Charity

Donating appreciated stock can help you avoid capital gains taxes and claim a deduction.

Retirement

If you are currently employed, you should be saving in your 401k or 403b. If you’re self-employed, you can set up a SEP IRA, SIMPLE IRA, or a solo 401k.

Healthcare

The most advantageous strategy is to use a Health Savings Account (HSA). HSAs have three strong advantages: 1. Savings with pre-tax dollars, 2. Growing tax deferral, and 3.Tax-free qualified Distributions.

Retirement

If you are currently employed, you should be saving in your 401k or 403b. If you’re self-employed, you can set up a SEP IRA, SIMPLE IRA, or a solo 401k.

Healthcare

Income Reduction

Your employer may offer a deferred compensation plan that allows you to postpone, say 10% of your salary or bonus until a later date. The benefit of this is that you Don’t actually receive this income, so you don’t have to pay taxes yet.

Tax Credit

A tax credit is a value you are able to subtract from the taxes you owe, rather than reducing your taxable income. There are many types of tax credits you could qualify for, especially if you have children, are going to college, or buy an electric vehicle.

Income Reduction

Tax Credit

Reduce Taxes on Capital Gains

If you make money from selling an investment, you will need to pay a tax from those gains, also referred to as the capital gains tax (CGT). Two ways to take advantage of these capital gains are long-term capital gains and gain and loss offset.

Reduce Taxes on Capital Gains

Take Advantage of Your Tax Refund

Getting a refund from your tax filing in April is NOT a tax strategy, so if your entire tax goal is dependent on getting a large refund, you’re not making the most of your tax strategy and should probably re-evaluate. Consistently getting a refund in April might be a symptom of incorrect tax withholding. This should be addressed so you can get more money throughout the year rather than waiting for the IRS to send that direct deposit.

Although it’s not a recommended tax strategy, there are certain ways you can take advantage of a tax refund.

How To: Implement Your Tax Strategy

The best way to understand your tax strategy options and eligibility is to speak to an expert. A financial advisor is the best person to tell you how you can maximize the benefits of your tax strategy and align it to your financial priorities.

Having a strategy is by no means a way to avoid paying taxes. On the contrary, it is a way to understand exactly how much money you owe and figure out what you can do in order to maximize the reduction in your tax bracket.

Laying out your financial priorities is a key aspect of developing a tax strategy because once you have those in check, you can ensure you are benefiting from the priorities in your tax strategy.