What Is Tax Planning?
Tax planning is the analysis of a financial situation or plans to ensure that all elements work together to allow you to pay the lowest taxes possible. A plan that minimizes how much you pay in taxes is referred to as tax efficiency. Tax planning should be an essential part of a small business owner or high-net individual financial plan. Reduction of tax liability and maximizing the ability to contribute to retirement plans are crucial for success.
- Tax planning is the analysis of a financial situation or plans to ensure that all elements work together to allow you to pay the lowest taxes possible.
- Considerations of tax planning include the timing of income, size, the timing of purchases, and planning for expenditures.
- Tax planning strategies can include saving for retirement in an IRA or engaging in tax gain-loss harvesting.
Understanding Tax Planning
Tax planning covers several considerations. Considerations include timing of income, size, and timing of purchases, and planning for other expenditures. Also, the selection of investments and types of retirement plans must complement the tax filing status and deductions to create the best possible outcome.