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Tax planning considers the tax implications of individual, investment, or business decisions, usually with the goal of minimizing tax liability. Although decisions are rarely made solely on their tax impact, you should have a working knowledge of the income or estate tax issues and costs involved.
A major goal of tax planning is minimizing federal income tax liability. This can be achieved by:
- Reducing taxable income through income deferral or shifting
- Deduction planning
- Investment tax planning
- Year-end planning strategies
- The treatment of wash sales
- Tax-exempt investments
- Gains and losses
- 1031 exchanges
- Qualified dividends
- Tax straddles
- Tax-deferred investing
- Passive income and losses
- Mutual fund taxation
Tax issues are never far from the mind of the business owner, and it’s likely that many of the decisions you make will be tax-based. It starts with the formation of your business and continues through the 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.
Some events in life—retirement, for example—come with tax considerations. Life event planning focuses on the impact of significant events on your life, as well as on the stages of your overall investment plan.
Fixed insurance products and services offered by The Insurance Exchange are separate and unrelated to Commonwealth.