Tax Planning
Planning to minimize lifetime taxes.
Shrewsbury Financial Collaborative
Table of content
Tax Planning
The goal of tax planning is to reduce one's lifetime tax liability to the smallest amount possible allowed by the law. The first step is to understand how taxes work. Next, options are explored that could decrease taxes paid. Finally, the options are evaluated together to see which combination produces the best results over a lifetime of tax payments.
The Details
Ordinary Income is the catch-all for most income and does not receive preferential tax treatment.
Capital Gains are gains from the sale of property and usually are taxed at lower tax rates.
Tax Deductions are amounts that are deducted from taxable income before calculating the taxes owed.
Tax Credits are amounts deducted from the taxes owed.
Additional Taxes are taxes owed in addition to income taxes.
Estimated Taxes and Withholding is the required process of prepaying taxes that are expected to be owed.
A Roth Conversion is the act of choosing to prepay taxes on retirement savings.