Although most of the people use the term “tax planning” but this term is often misunderstood. Basically, tax planning is the art of learning to manage the affairs in a manner, which can help to avoid or postpone taxes. In other words, it can be said that tax planning is all about avoiding or deferring taxes by taking the advantage of beneficial tax-law provisions. With skilled tax planning, it is possible to save and invest more cash and this can also make the tax season more like a financial boost rather than a financial burden.
Tax planning strategies are mainly designed and employed by the tax accounting professionals to achieve the desired goals. Besides, a complete series of steps are also undertaken to achieve only intended end. Even though the strategies within the field of tax planning are followed to achieve all the financial goals, these are also used to achieve all the business goals. So, in case you have some effective tax planning strategies, then these should accomplish or address the following goals successfully:
- Lower the taxable income amount
- Decrease the rate at which you are taxed
- Making it sure that all the credits are available to the business owner
- Empower the business owner while the taxes are being paid
Here are the taxes planning strategies that can reduce the tax liability of the business owners:
- Maximum contributions to retirement: Deferral of taxation is considered as one of the most useful and common tax strategies for people, who are in high tax bracket at present. But in case one follows this path expect being in the lower tax bracket at sometime in the future while withdrawals are mainly taken.
- Consider some charitable gifts: This strategy is beneficial in case one can itemize the tax deductions and plan on making some donations. Appreciated assets are some of most tax-effective and charitable donations. Donating all these assets will help you to avoid paying any capital gains on appreciation.
- Investing in the municipal bonds: Some of the high income earners often become subjected to some additional tax on all types of investment income. With the municipal bonds, it is possible to avoid this type of additional tax as well as it is also possible to avoid all the state and federal income taxes. This means that the tax equivalent yield increases for all the taxpayers, who make the muni-bonds more attractive.