23 May 2022 What Is Tax Planning? How Can It Help Me?
For most Americans, taxes are only a topic of importance for three or four months out of the year. Contrary to popular belief, being tax-savvy 365 days a year is much less “taxing” than you might think. In fact, for people with larger incomes who generally pay much more in taxes than the average American, tax planning is crucial to lowering your tax liabilities and ensuring you don’t pay more than you are absolutely required to by law.
Professional CPAs at Haynie & Company recommend following these three tax-planning steps to help you improve your financial health throughout the year, limit the amount of taxes you pay, and make next tax season – and the seasons to follow – stress-free.
CONSIDER DEFERRING YOUR INCOME
If you are concerned about the amount of your tax liability, consider deferment planning – a method of postponing your income to the following year in order to minimize your income tax liability. Not only would income deferment allow you to invest the money you would typically use to pay income taxes, but it will also give you a chance to be in a lower income tax bracket when you do ultimately submit your income.
Discuss how you can best defer your income with an experienced CPA. Whether you postpone the payment of your taxes via a retirement plan, contribution to the traditional IRA, investment in a permanent life insurance plan, or an investment in a particular savings bond, there are plenty of options available to you.
SHIFT YOUR INCOME
Another method of tax planning can be done by shifting your income to members of your family who have a lower tax bracket. For example, you can “gift” your spouse, sibling, or child up to $13,000 each year without it incurring a federal gift tax. Not only will this help lower your tax burden, but it will also greatly minimize your federal tax income.
Tax “gifting”, shifting or sharing income, and structuring specific transactions can be done legally and effectively. It’s a safe, popular way for individuals who generally pay a lot in taxes to lower their tax burden.
DEDUCTION PLANNING WITH PROPER TIMING
Deduction planning helps you lower your federal income tax liability by timing all of your deductions in the most efficient way possible. You can either itemize your deductions or take the standard deductions.
Be sure to note, however, that some itemized deductions are only allowed if they don’t exceed a particular percentage of your adjusted gross income (AGI). By lowering AGI, you can increase the amount of deductions you’re allowed. Lower your AGI by deferring a portion of your income into the following year, invest in text-exempt income opportunities, and contribute frequently to your retirement plan.
CONSULT WITH A QUALIFIED CPA TO LEARN MORE ABOUT TAX PLANNING, AND START YOUR PLAN TODAY
As certified public accounting and business advisory specialists, the professionals at Haynie & Company can help you plan and prepare for tax season so you can make the most out of your finances. With locations in Dallas, Denver, Salt Lake City, and many more, you’ll be connected to qualified CPAs near you. Contact us today to get started.
Contact the Tax Accountants at Haynie & Company CPA Firm for Tax Planning Help
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