Today’s Tax Tip of the Day – Tax planning is beneficial in identifying opportunities to lower tax liability and/or avoid underpayment penalties based on the known components. Common variables include anticipating future changes in income, filing status, capital gains realizations, and fund distributions. Taking certain actions now will affect an individual’s tax situation this year and in future years as compared to taking those actions in future years, or when possible, spreading income over multiple years.
You should start tax planning early – timing the receipt of income so that it is claimed in years when it will be taxed at the lowest tax rate, and claiming deductions in years when you are in the highest tax bracket. Many individuals find that they have more flexibility in accelerating or deferring expenses that generate tax deductions rather than trying to time income recognition.
You should start tax planning early – timing the receipt of income so that it is claimed in years when it will be taxed at the lowest tax rate, and claiming deductions in years when you are in the highest tax bracket. Many individuals find that they have more flexibility in accelerating or deferring expenses that generate tax deductions rather than trying to time income recognition.