The smartest tax-saving strategies are not Hail Mary efforts; they’re decisions made throughout the year that culminate in meaningful tax saving, which can be seen when tax season arrives. If you’re an individual who wants to keep more of your money or a small business owner who’s struggling with a mounting tax burden, the rules are the same: plan as early as possible, record everything, and claim all deductions you’re entitled to. This blog provides smart tax planning tips that are actionable and provide clarity.
What are the best strategies for taxes for you and your small business this year?
The best tax-saving strategies are those that limit the taxable income that is earned, not received. This means that proactive considerations are being taken at the beginning of the year around how income is being earned, how expenses can be classified, and what tax planning tools are being utilized during the year – not rushed for at the last moment before the filing.
Creating a Tax-Efficient Financial Plan.
- Contribute as much as possible to tax-deferred plans like a 401(k) or IRA so as to lower your gross income this year when the federal tax rates apply.
- Business owners should examine entity structure on an annual basis – for instance, the structure of a business as an S-Corporation can drastically lower self-employment tax liability versus running it as a sole proprietorship without an entity change.
- Record and classify all business expenses during the year the home-office, vehicle expenses, equipment and professional development to ensure that they are properly documented and deducted when you file your tax return.
What are the Tax Deductions and Credits taxpayers should not miss?
Two of the biggest and most expensive tax filing errors which are not errors in the deductions but simply that most taxpayers don’t know where to find them are missed deductions and unclaimed credits. The first step to knowing how to reduce taxable income is to understand what benefits exist, and whether you are eligible.
Making the best use of tax benefits that are available.
- The Child and Dependent Care Credit, Earned Income Tax Credit and education-related credits are often overlooked, particularly by those who think they may not earn them due to their income.
- Self-employed people can claim a deduction for health insurance premiums, 50 percent of self-employment tax and qualified business expenses, which are deductions made before the standard or itemized deduction.
- Lots of charities, home improvement projects that save energy and interest on student loans are deductible now and they’re each a real tax break that can easily be overlooked if you don’t have a plan for reviewing your deductions.
What is the value of Planning for All Seasons to Lower Your Total Tax Burden?
One of the best smart tax planning tips you can take all year is year-round tax planning — and that’s the one most people forget. Not making financial moves towards your taxes until April could mean you’re missing out on opportunities that may have lowered your tax burden considerably during that same time.
Creating proactive steps before filing season:
- Make sure to check your tax withholding or estimated quarterly payments mid-year to prevent having a huge amount due on the day you file or overwithholding, which you could end up with if your tax savings are locked in the IRS with no interest.
- Increase or decrease deductible income or expenses within the current year or decrease or increase income in the subsequent year, as needed, to maximize the amount of income in each filing year.
- Do a mid-year tax forecast with a professional to figure out any gaps, opportunities, and adjustments before December 31, when most choices for the tax year have passed and cannot be changed or optimized.
How can Retirement and Investment Strategies be used to reduce Taxable Income?
Retirement saving and investment choices are among the most effective ways to minimize taxable income, and can work for both people and business owners when planned properly as part of a comprehensive financial strategy.
Tax-Advantaged Savings Opportunities
The contribution to a traditional IRA, SEP-IRA, or 401(k) will lower the amount of taxable income dollar for dollar up to the contribution limits. Health Savings Accounts have three tax benefits: They are tax-deductible, earnings are not taxable, and withdrawals for qualified medical expenses are not taxable. Business owners can also set up defined benefit plans, where they are able to contribute much more per year than they would be able to with a regular retirement plan.
This is where Epicwayz Advisors makes an impact. Epicwayz Advisors of Plano is a trusted advisory firm that provides Tax Services, Fractional CFO Services, Accounting Services, and Business Advisory Services based on proactive, year-round tax strategy and not only annual filing. From helping you identify deductions to maximizing your retirement contributions and creating a full financial tax plan, Epicwayz Advisors has the knowledge you need for smart tax planning. Seek professional advice remember the right advisor will save you money in the taxes you will not pay!
Strategic Financial Leadership for Growing Businesses
Get executive level financial guidance
- Cash Flow Forecasting & Budget Planning
- Financial Strategy & Performance Insights
- Investor and Capital Planning Support
Conclusion
Making tax savings is not a shortcut; it’s all about knowing the rules and taking advantage of them. Each of the creative thoughts for tax planning in this blog is a legitimate opportunity to save taxes, be it maximizing deductions or planning for retirement, the year long approach. Epicwayz Advisors is here to assist you in implementing these strategies properly, fully and with confidence so that tax season becomes an enjoyable time, not a dreaded one.
