Taxes are a critical component of financial management. Your paycheck, investment strategies, and retirement planning – they invade every aspect of your life.
Rightfully so, every individual wants to keep more of their hard-earned money or grow their savings without the overbearing burden of paying taxes on them later. This is where professional tax planning services come in!
They help you take advantage of every tax saving opportunity, allowing you to save for retirement and other goals with confidence. Here’s everything you need to know about them:
What Exactly Is Tax Planning?
Tax planning is a proactive financial practice that involves analyzing your finances to ensure you pay the lowest tax legally possible. It is all about looking at the bigger picture and making smart decisions to help support an individual’s financial life.
Young professionals, individuals nearing retirement, and ultra-high-net-worth individuals (UHNWI) can and must look into effective tax planning to build assets.
How Professional Tax Planning Services Help
Unfortunately, tax laws and their subsequent strategies can be difficult to understand. The internet is riddled with financial jargon, with “experts” pulling you in different directions. In such a situation, you need to work with a professional who has a comprehensive understanding of tax planning.
Using tax planning services can offer the following benefits:
Proactive Tax Strategies
Instead of waiting till the last moment, reliable tax planners implement proactive strategies to lower tax liabilities. Some examples include:
- Tax-loss harvesting
- Asset location
- Opportunistic rebalancing
- Deferring income to lower tax brackets
- Gifting strategies
These strategies can boost your retirement savings.
Planning Charitable Contributions
Making charitable contributions is one of the most beneficial tax planning options. That said, without the guidance of a professional, it’s hard to navigate the process.
A tax planning service provider like Creative Planning will determine eligibility and the exact amount of qualified charitable distributions (QCDs) you can make directly to the IRS. Qualified tax planners will also make sure the charity is a qualified 501(c)(3) organization, so there is no itemization required.
Long-Term Wealth Accumulation
Every individual wishes to build a legacy. Efficient tax planning is necessary for gradually increasing your assets and investments over time. Professional wealth managers will analyze your long-term financial goals and offer tailored tax limitation strategies.
Tax-Efficient Withdrawal Strategies
Tax efficiency is critical for a comfortable retirement. Tax planning services can help you build and follow a sustainable withdrawal strategy. Here’s an example:
- Withdraw from taxable accounts first. This can be your brokerage accounts or saving accounts.
- Withdraw from tax-deferred accounts. This can be your Roth IRA.
- Early Roth conversions. Convert some traditional IRA money into a Roth IRA before the Required Minimum Distributions (RMDs) kick in.
Regulatory Compliance
Professional tax planners know the law inside and out. They will reduce tax liabilities while ensuring compliance with state and federal regulations.
Planning for the Future
Tax planning services bring peace of mind. With low tax liabilities, you can keep more of your income and achieve financial and retirement goals.
