Many individuals and businesses conduct tax planning initiatives of some sort before the annual mid-April federal filing deadline. From jotting down work expenses to logging away invoices and vendor payments, the importance of tax management in tax planning is readily apparent, even if it’s just to save a little time when it’s time to file an annual return.
However, comprehensive tax planning is much more than careful accounting. An expert tax planning services provider like Saddock Advisory can take a closer look at your unique financial situation and identify concrete and easy-to-initiate ways to minimize your annual taxes now and years into the future.
Before you begin your tax planning journey, it’s helpful to have answers to the most common questions. Some questions include what tax planning benefits, types of tax planning, and where we go from here.
The Importance of Tax Planning and Tax Management
Taxes are simply the cost of doing business. However, unlike other expenses like utilities, supplies, or rent, the taxes that you need to pay are not necessarily fixed costs and can be influenced by your strategies and actions.
Thorough tax planning entails understanding the tax regulations, income brackets, other thresholds, and varying credits and deductions. Additionally, using this knowledge to your best advantage to make smart financial decisions now that will have a beneficial impact on your bottom line.
Therefore, tax planning is essentially multi-pronged and requires purely individualized strategies. However, common considerations in smart tax planning include timing, investments, and overall business or individual strategies that have tax-related benefits.
Common initiatives like examining year-to-year changes in cash flow (and tax laws) or studying programs that provide tax-related benefits to a business or individual come into play and help guide the path to successful tax planning and tax management.
Types of Tax Planning
There are many different types of strategies when it comes to tax planning, and most of these are concurrent. (In other words, you want to look at tax planning and management for the current year, as well as a decade from now for a tax planning strategy to be most effective.)
Here is just a sample of the different types of tax planning strategies that may come into play for your individual financial situation.
Permissive tax planning
Permissive tax planning entails examining the deductions, credits, and exemptions that may minimize your tax liability, in the context of broader financial goals and priorities. This way, tax efficiency is achieved over an extended period by strategically monitoring and timing different investments, expenses, income, and other initiatives.
Purposive tax planning
Similar to permissive tax planning, purposive tax planning entails enlisting the varying deductions, credits, and exemptions available to benefit your bottom line, but with a focus on the current tax year. Specifically, taxpayers can take advantage of the varying tax benefits at their disposal to minimize their annual taxes for 2024 and beyond.
Marginal Tax Planning
Marginal tax planning examines the effects of expenses or additional income on an individual’s tax liability, especially when it comes to the near future timeframe. By optimizing your income to align with lower tax brackets and perfectly timing your varying expenses or income with these brackets in mind, your taxes can be minimized for the long term.
Structural tax planning
Structural tax planning is best suited for business owners or individuals with complicated assets and investment portfolios. It involves making strategic moves that will benefit the taxpayer while minimizing taxes owed. For example, changing a business structure or setting up a trust may have huge tax benefits that resonate for years.
Achieve the Best Tax Planning Strategies with Expert Tax Planning Guidance
When it comes to tax planning, some tax-saving initiatives – like contributing to a retirement account or delaying certain income to stay within a lower tax bracket in the current year – will be prominent. But an expert can help identify those less obvious but strategic moves that will benefit your finances now and well into the future.
Tax Planning Strategies with Saddock Advisory
Whether you manage a business or simply have questions about whether you’re making the best financial moves for your future – and your annual taxes – we can help.
Connect with us today to start the discussion, and let’s take a closer look at the easy and simple tax strategies you can employ that will have a significant impact in April 2025 and for the future. With a consultation with a tax expert, you’ll take a considerable step in more innovative tax planning that is designed to result in financial gains for the long-term future.
