Tax planning can make a huge difference in the state of New York. You could save or lose thousands of dollars depending on how you approach your tax planning. While there is no one size fits all solution to tax planning, there are specific strategies that are often utilized to benefit taxpayers in different income brackets.
Common tax planning strategies
Tax planning can be a complex technical process that differs from taxpayer to taxpayer. Still, there are common tax planning strategies that work for a good portion of the tax-paying public. These include:
- Claiming as many tax credits as you can
- Claiming as many deductions as possible
- Utilizing a Health Savings Account
- Utilizing a tax-advantaged retirement plan
- Utilizing a 528 college savings plan
- Focusing on long-term capital gains with your investments
- Adding municipal bonds to your portfolio
- Setting up a tax advantaged trust
- Ensuring you are in the most beneficial tax bracket possible
- Considering charitable giving to lessen your tax burden
Tax planning during the year
Trusts, charitable giving and tax planning tips should only be part of your overall strategy. Tax planning should be an ongoing year-long process if you want to lower your yearly tax bills by the largest amount possible. It shouldn’t be something you only consider during tax season or at the end of each quarter. This should include steps like:
- Saving receipts
- Saving financial documentation
- Forecasting yearly expenses and income streams
- Performing routine bookkeeping when needed
- Selling or making investments at the right time
- Seeking financial advice at the beginning of the tax year
Overall, everyone is required to pay income taxes in the United States. However, how much you pay can undoubtedly be greatly impacted by your tax planning strategies.
