Tax planning considers the tax implications of individual, investment, and business decisions, usually with the goal of minimizing tax liability. Although decisions are rarely made solely on their tax impact, you should be aware of the costs in order to manage your finances effectively.
A major goal of tax planning is to minimize federal income tax liability. This may be achieved by reducing taxable income through deduction planning, investment tax planning, and/or income deferral.
Investment tax planning involves understanding the various methods of taxation:
Capital gain taxes
Some events in life—retirement, for example—come with special and significant tax considerations that should be part of your financial plan.
Finally, tax issues are never far from the mind of the business owner, starting with the formation of your business and continuing through its sale. Your choice of business entity, how you pay out profits to the owners, and your accounting decisions will all have an effect on your tax liability.