Tax planning is the process of reducing the percentage cut through deductions and exemptions. There are four types of tax planning: long-term, short-term, purposive, and permissive.

A long-term strategy is made at the beginning of the year and is monitored throughout, while a short-term one is done at the end of 12 months. Purposive planning is a change or modification in finances for the sole purpose of enjoying full benefits on all transactions. Permissive planning is making use of concessions as provided under the law.

Everyone likes a huge paycheck, but most people can relate to the disappointment that comes after the significant cuts. What is left of the salary may be lower than the amount for standard upkeep. While it is compulsory to pay taxes, there is a way to limit the liability. The importance of tax planning cannot be overemphasized, as it helps individuals and businesses manage their finances effectively. Businesses sometimes suffer from double taxation or excessive bills; effective management will help put these situations in check. You may find yourself saving more with a new strategy for building better finances.

Here are some management ideas

  • Retirement plans

There is a retirement savings plan known as Roth IRA that permits pre-retirees to set aside money for future purposes without tax deductions. With the Roth IRA, you can enjoy a return on investment like your typical savings account. Here, your qualified distributions will not be taxable. There is also the health account that deducts your savings before cuts are made.

  • Defer Your Taxes

Before embarking on a deferred plan, you may want to consider your future cash flow. A prediction of a higher or reduced income will influence your decision to open a tax-deferred account. It would help if you only made this decision as an attempt to maximize your savings.

  • Know The Laws

Knowing the tax laws per transaction may enable you to make financially-savvy decisions. For example, couples may enjoy discounts on specific transactions, while singles may not. Having a financial or account manager may be the best decision to keep abreast of all the necessary laws.

  • Tax Filing Options

There is the standard and the custom deduction when filing your taxes – you should consider both options to pick the one with the most saving benefits. It also gives you the chance to assess your financial lifestyle for the year and make the necessary adjustments.


Any opinions are those of the author and not necessarily those of Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted.