Taxes can have a major impact on your financial and investing plans. Planning out your taxes before filing and having a strategy can change how much you end up paying (or getting back) when you file on tax day.
You may have heard terms like,“tax planning” and “tax strategy.” For most of us, both are crucial to keeping more of your hard-earned money in your pocket.
Let’s break these two terms down.
Tax Planning vs. Tax Strategy
Tax Planning is like the blueprint for your financial house. Tax planning is about:
- looking ahead
- understanding your income, deductions, credits, and opportunities
- laying the groundwork to minimize your tax liability for the year.
It’s proactive, and if you’re doing it right, you’ll be taking advantage of every legal deduction and credit available to you.
Tax Strategy is the playbook for your specific situation. Tax planning is personalized, dynamic, and gets into the nitty-gritty of your financial life—whether you own a business, have investments, or even just experienced a major life change (hello, new house or baby!).
Tax strategy is where the magic happens because this is where you can start to make real-time adjustments to maximize your savings.
Here’s a simple analogy: Tax planning is setting the GPS for your destination. Tax strategy is choosing the route that avoids all the tolls and traffic. You need both to get where you’re going, but the route might change along the way.
Why Both Matter—Every Year
The tax code isn’t static, and neither is your life. Whether you’re expanding your business, getting married, selling an asset, or even retiring, your tax plan and strategy need to adjust to fit. That’s why tax planning and strategy aren’t just one-time deals—they require maintenance and upkeep.
New Tax Laws
Congress loves to change the tax laws on us, often at the last minute. What worked perfectly last year may not apply anymore, so you need to make sure your plan is up to date.
Life Changes
Did you recently start a business, have a child, or sell some stocks?
Each of these can dramatically change your tax situation, and if you’re not prepared, you could end up with an unexpected tax bill.
Who Needs Tax Strategy
When people hear “tax strategy,” they often think it’s something only the ultra-rich need to worry about. But let me tell you: the right tax plan can save anyone thousands—yes, even you!
If you fall into one of these categories, you should consider creating a tax strategy:
- Business Owners – Proper tax planning and strategy can help you maximize deductions on business expenses, reduce self-employment taxes, and even use retirement contributions to lower your taxable income. With the right plan, you could save $10,000 to $50,000 annually just by optimizing your expenses and structuring your business correctly.
- Rental Property Owners – By carefully planning depreciation, deductions for mortgage interest, repairs, and property management fees, a well-executed tax strategy can save you up to $20,000 per property per year.
- High Earners – Strategic use of retirement plans, Health Savings Accounts (HSAs), and charitable contributions can help reduce taxable income. One client saved $35,000 in one year just by making the right charitable donations at the right time!
- Small Business Owners or Entrepreneurs – If you’re starting a new business, proper tax planning can help you claim deductions for startup costs and expenses. By doing this early on, new business owners can save up to $15,000 in their first year alone.
As your business or life evolves, so do your tax needs. It’s important to stay ahead of the curve so that you’re not caught off-guard when tax season rolls around.
Tax experts recommend doing strategy sessions at least twice a year, after the May 15 and September 15 deadlines. These meetings give us the chance to fine-tune your tax strategy, make any necessary adjustments, and ensure you’re on track for maximum savings.
Ready to save? Reach out to Accent Financial Services today and book your tax strategy session.