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Tax Strategy

The Benefits for Strategic Tax Planning

Strategic tax planning is the methodical process of reducing your tax liability while maximizing your take-home income. Tax planning is not the same as filing a tax return and looking for deductions or credits after the tax year ends. Instead, we look at your income, expenses, and investments accounts now and structure them in a way that benefits you financially when taxes are due.

Taxes make up much of your expenses every year. It makes sense to plan for them and try to minimize them. There are many legal ways to reduce your tax burden, and we would like to explore them with you. Taxes can even affect your ability invest in your financial future.

How Taxes Affect Your Investments

How Taxes Affect Your Investments

Your income tax bracket largely determines how much of your money goes to paying taxes. But you can actually use pre-tax income to put towards your investment accounts if you use a retirement account structure. This reduces your taxable income and allows you to put more money toward retirement. You can even use different retirement accounts to max out your contribution limits. 

Tax planning is also important after you retire. If you’re more concerned about paying income taxes in retirement, you can choose to use your after-tax income to invest in a Roth retirement account. With Roth accounts, your distributions will be tax free. Many people use a combination of these types of retirement accounts to minimize their tax liability now and in the future.

Why Is Tax Planning Important?

Why Is Tax Planning Important?

Tax planning allows you to keep more of your hard-earned money. It also lets you know what you will pay ahead of time instead of wondering all year how much your bill will be, come April. If you plan your finances with taxes in mind, you can save money and prepare for your financial future. Our financial experts can even help you decide which assets to keep, sell, or convert to minimize capital gains tax.

Examples of Strategic Tax Planning

Examples of Strategic Tax Planning

There are different ways to save money on taxes. Our tax planners consider your situation before giving specific advice that works for you. But here are some examples of tax planning strategies:

  • Using pre-tax retirement accounts to minimize taxable income
  • Converting assets to minimize capital gains tax
  • Structuring your income stream to place you in the best possible tax bracket

If you haven’t employed tax planning strategies to increase your net income, there’s a good chance you’re paying more in taxes than you need to. It’s time to put yourself first and start investing some of your income before you pay taxes.

FAQs about Tax Planning

Who Should Use Tax Planning?

Everyone with taxable income can benefit from strategic tax planning. Even if you’re already contributing to a pre-tax retirement account, you may still pay more in taxes than you legally need to. Tax planning can help you evaluate your finances and make better decisions. And while there’s no specific date to start, the sooner you get strategic about your taxes, the more money you’ll get to keep for yourself.

How Can I Save Money on Taxes?

There are different ways to reduce your taxable income. A pre-tax retirement account is a great way to invest in your financial future and reduce your earnings for tax purposes. But you also want to look at your other investment accounts and prevent capital gains tax due when selling highly appreciated assets. We’re happy to look at your finances and help you devise a tax saving strategy that works for you.

What’s the Best Tax Planning Strategy?

There is no one-size-fits-all tax planning strategy. The tax code is extremely complex, which is why everyone’s situation is different. How to best minimize your taxes depends on your earnings, your tax bracket, your investment accounts, and many other factors. For specific advice, call us to set up an appointment.

Meet with Our Tax Planning Consultants

You are legally allowed to reduce your tax bill as much as possible. The only caveat? It often takes a financial or tax professionals to understand and create a tax planning strategy that minimizes your tax burden. Call Upstream Investment Partners today to schedule a tax planning appointment.

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