When it comes to managing your finances, tax planning is a crucial element that should not be overlooked.
Whether you’re an individual or a business owner, taking the time to plan for your taxes can save you money, prevent surprises, and ensure you’re making the most of the opportunities available to you.
But how do you know when it’s time to schedule a tax planning session? In this article, we’ll walk you through the key triggers that signal it’s time to sit down with a tax professional.
What Does Tax Planning Involve?
Tax planning is a proactive approach to managing your tax obligations. It involves a thorough review of your financial situation, including your income, expenses, investments, and any significant life changes.
During a tax planning session, your tax professional will assess your current tax strategy, identify opportunities for tax savings, and help you plan for upcoming tax liabilities. The goal is to minimize your tax burden while ensuring compliance with tax laws.
This process might include adjusting your withholdings, exploring deductions and credits, planning for capital gains or losses, and preparing for major life events that could impact your taxes.
Signs That It’s Time To Start Tax Planning
There are countless reasons to have a tax planning session, whether it’s for general advice or specific guidance on complex tax matters. However, there are certain situations where a tax planning session is not just advisable, but essential.
If any of the following scenarios apply to you, it’s time to consult with a tax expert.
Last Year You Owed Taxes
If you found yourself writing a check to the IRS last year, and you haven’t adjusted your withholdings, you could be setting yourself up for another big tax bill.
A tax planning session can help you evaluate your current withholdings and make necessary adjustments to avoid a similar outcome this year.
You’ve Had A Change In Your Household Income
A significant change in your household income, whether it’s an increase or decrease, can have a substantial impact on your taxes. Higher income might push you into a new tax bracket, while lower income could affect your eligibility for certain deductions or credits.
Tax planning can help you navigate these changes and optimize your tax strategy.
You’ve Gotten Married Or Divorced
Life changes like marriage or divorce bring about new tax considerations. Filing jointly as a married couple can provide benefits, but it can also come with surprises if not planned for properly.
Similarly, transitioning to single status after a divorce requires careful tax planning to ensure you’re prepared for the changes in your tax obligations.
Your Child Is Going To College
College expenses can be daunting, but there are several tax programs designed to help. From education credits to deductions for tuition, a tax planning session can help you understand the options available and how to make the most of them.
You’re A Small Business Owner
Owning a small business adds another layer of complexity to your tax situation. From depreciation benefits to the qualified business income deduction, there are numerous tax considerations to take into account.
A tax professional can guide you in understanding how your business profits will affect your personal tax return through flow-through taxation.
You’re Looking At Selling Investments
Selling investments can trigger capital gains taxes, which can range from 0% to 37%, depending on whether the gains are short-term or long-term and your income level.
Proper tax planning can help you manage these taxes and potentially reduce your tax liability.
You’ve Had A Change In Your Employer-Provided Benefits
Changes to your employer-provided benefits, such as health insurance or retirement contributions, can impact your taxable income.
A tax planning session can help you understand these changes and how they will affect your overall tax situation.
You’ve Been Involved In A Real Estate Transaction
Real estate transactions come with a host of tax implications. Whether you’re buying, selling, or facing foreclosure, there are tax benefits and surprises to consider.
A strategic tax plan can help you navigate these complexities and maximize the benefits available to you.
You’re Dealing With Medical Expenses
The threshold for itemizing medical deductions is 7.5% of your income. This means that to deduct these expenses, they must exceed this percentage.
However, with proper planning, there are ways to pay these expenses with pre-tax money, reducing your overall tax burden.
You Lost Or Changed Jobs
Job changes can bring unexpected tax implications, particularly if you’ve received federal unemployment benefits, which are taxable.
A tax planning session can help you account for these changes and avoid surprises when tax season arrives.
You Haven’t Reviewed Your Estate Recently
Estate planning is a critical aspect of tax management, especially with recent changes to gift tax and estate tax laws.
If your estate hasn’t been reviewed in the past year, it’s time to sit down with a tax professional to ensure your estate plan is up-to-date and optimized for the current tax environment.
You Had A Child Or Have A New Dependent
Welcoming a new child or taking on the responsibility of a dependent is a joyous occasion, but it also brings new tax obligations.
A tax planning session can help you understand the tax benefits available to you and ensure you’re fully prepared for the changes ahead.
Minton CPA Is Your Trusted Tax Advisor For Professional Tax Preparation And Planning
At Minton CPA & Associates, we pride ourselves on providing expert tax planning and preparation services to both individuals and business owners.
With over 30 years of experience, our team of tax experts are dedicated to helping you navigate the complexities of the tax code and optimize your financial situation.
Don’t wait until tax season to address your concerns—contact us today at 757-546-2870 to schedule your tax planning session. Let us help you take control of your taxes and plan for a brighter financial future.