A Tax-Planning Mentality
While it can be easy to think tax planning is synonymous with tax preparation, each serves a different function. When you plan for taxes throughout the year, you can make decisions that may save you tax dollars. By the time you get to tax preparation — when it’s time to file your taxes — it’s too late to do much that can lower your tax bill. That’s why it’s best to have an all-year mentality when it comes to tax planning. Early in the year, take time to assess your tax situation and take steps to become better informed about ways to reduce your tax bill, like doing self-research or speaking with a tax professional. Consider the tax consequences throughout the year before making important financial decisions and transactions. In the fall, take another look at your situation and give yourself enough time to implement any additional tax-planning strategies before the end of the year. There are three main strategies to reduce your income tax bill:
Reduce or eliminate taxes by receiving income in a nontaxable form or utilizing all applicable deductions, exemptions, and credits.
Postpone the payment of income taxes until sometime in the future, primarily through the use of tax-deferred retirement accounts.
Shift the tax burden to another individual, through the use of tax-free gifting to children or other individuals.
By taking the time throughout the year to assess your tax situation and plan accordingly, you can ensure you won’t look back and regret not implementing small changes that would have lowered your tax bill.
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This newsletter was prepared by Integrated Concepts Group, Inc. The opinions expressed in this newsletter are for general information only and are not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. The views expressed are those of the author and may not necessarily reflect those held by PlanMember Securities Corporation. Material presented is believed to be from a reliable sources and PSEC makes no representation as to it accuracy or completeness.