Tax Planning – Irving, TX
Effective Strategies to
Help You During Tax Season
When filing your taxes, do you fully understand the different regulations and codes? Between navigating the various brackets and attempting to stay up to date on any changes the Internal Revenue Service (IRS) makes, it can be a confusing and challenging process. Fortunately, our team at Cadent Capital, LLC is equipped to provide tax planning services that will help minimize the amount you pay to the IRS each year. Call our office to speak with a member of our team if you would like to begin an integrative process of lowering your tax burden.
What is Tax Planning?
Tax planning is a method of wealth management that uses various strategies to help clients reduce the amount they owe to the IRS.
Because there are laws, regulations, codes, and brackets that must be considered, tax planning can be advantageous no matter how much you make. Generally, you will pay more in taxes if you have a higher adjusted gross income (AGI); however, with the help of tax planning professionals, you can determine which changes are necessary to reduce your AGI and in turn, pay less when it comes to tax time.
Importance/Benefits of a Tax Plan
There are multiple benefits that you can expect when choosing to move forward with a detailed tax plan. These include:
- Learning which tax credits can help reduce your tax liability
- Finding ways to move into a lower tax bracket
- It helps to reduce any litigation
- Any returns that you receive can be used toward various investments
- The investments that benefit from your return help to boost economic stability
What are the 3 Basic Tax Planning Strategies?
When working with a trusted professional, you can expect to go over the three basic tax planning strategies – tax credits, retirement contributions, and deductions.
Tax Credits
When looking at the available tax credits, your financial advisor will determine if you are eligible for any that might lead to a refund or lower the amount you owe the IRS. These often include:
- Child Tax Credit
- Earned Income Tax Credit
- Elderly or Disabled Credit
- American Opportunity Tax Credit
- Child or Dependent Care Credit
Retirement Contributions
If you have an Individual Retirement Account (IRA), and you contribute to it regularly, this, too, can be used as part of your tax planning strategy. While there are limits with regard to how much you can contribute, this income that you save cannot be taxed…at least for now.
Once you retire and start withdrawing on your retirement, you can expect to be taxed at that time; however, most individuals are not in the same tax bracket at this time, making the due payment less of a shock.
Deductions
When filling out your tax return information, you will note if you have any deductions, as this will help to lower your taxable income. A majority of taxpayers settle for standard deductions; however, there is also the option to itemize your deductions. These can include:
- Medical and dental expenses
- Personal property taxes
- Real estate taxes
- Charitable gifts
- State and local income taxes
If itemizing your deductions is what you plan to do, you’ll want to make sure that you keep a record of your expenses so that you have documentation (i.e., receipts, statements, bills, etc.) should you be required to show any proof to the IRS.
Steps of/Things to Consider/How We Help
At Cadent Capital, LLC, we know that tax planning can be an overwhelming notion for many clients, which is why we strive to make the process as easy as possible. Not only do our talented team of professionals have the credentials and experience to create these plans, but we work closely with lawyers who understand the changes occurring to the tax laws.
As a result, we can help to build a tax plan that aligns with your current lifestyle and future goals. We will look at your AGI and make knowledgeable recommendations to ensure the IRS receives what they are owed based on the strategies we use throughout the year to help you save when it comes to your tax liability.
*Opinions expressed in the attached article are those of the author/speaker and are not necessarily those of Raymond James. All opinions are as of this date and subject to change without notice. Investing involves risk and you may incur a profit of loss regardless of strategy selected. The forgoing is not a recommendation, Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.Tax Planning FAQs
It’s normal to have questions when it comes to tax planning. This process requires working alongside professionals who understand the intricacies of what is legal and what is not. Who is tax planning for? Why is it necessary? What benefits can come from making changes now so that you avoid a higher tax bill come April 15? Our team at Cadent Capital, LLC wants to help, which is why we’ve answered some of the most frequently asked questions about tax planning below. If you don’t see yours listed, feel free to call our office and speak to one of our esteemed professionals.
Is there a difference between tax preparation and tax planning?
Yes, there is a difference between tax preparation and tax planning. In fact, one is designed as a proactive approach while the other is reactive. Tax planning allows you to stay forward-thinking. As you plan for the future, you can begin to think about ways to reduce your taxable income by noting various deductions or taking advantage of tax credits. Then, when tax season approaches and you receive a return, you can use it to invest in ways that will help you economically (i.e., putting toward retirement, setting money aside for a child’s college education, etc.).
With tax preparation, you are focusing on what has already occurred. After the calendar year is over, you begin to prepare your taxes (or give them to a tax preparer) once your documents arrive in the mail (i.e., 1099s, W2s). There are no additional deductions or tax credits you can apply for at this point. Whether you receive a refund or not is the only thing left to be determined.
Is tax planning only for the wealthy?
Many individuals might assume that this type of service is only necessary for those who are wealthy, but this is not true. All taxpayers can benefit from tax planning because of the benefits it can have on one’s future. The reality is that it doesn’t matter how much you make when it comes to tax planning. What matters is how much you keep. Underpayment or overpayment can be harmful no matter which tax bracket you fall into. Making sure that you are making legal and responsible choices can make a difference in how you run your business, how you plan for your family’s future, and how you take care of the necessities right now.
Opting to pursue tax planning services with a trusted wealth advisor makes it possible for you to invest and/or have money to help pay for things that you need now. Working with someone who can identify the various tax breaks you can take advantage of as well as those deductions that can help to reduce your AGI is a worthwhile investment for anyone, no matter how much money is made.
Who needs tax planning?
While tax planning can be beneficial for any taxpayer, it is especially important to those who are business owners, real estate investors, and long-term investors.
If you are a business owner, you will find that tax planning makes it possible to better understand how best to register your business. Because it is necessary to register as a legal entity, choosing the right one can have positive or negative effects when it comes to paying taxes. A trusted advisor can help you understand the differences between operating as a sole proprietor, corporation, or limited liability company. Having a comprehensive tax plan can help to minimize any surprises and maximize your profits.
If you are a real estate investor, you’ll need to determine if it is a main source of income or a secondary source. How you designate it on your tax forms will determine how much you can expect to pay during tax time and how much you can reap the advantages of this type of investment.
If you are a long-term investor, tax planning can be beneficial depending on how your portfolio is structured and whether you choose tax-advantaged investments (i.e., IRAs, 401(K), annuities, municipal bonds, partnerships, etc.).
What is the difference between an estate tax and an inheritance tax?
To determine the difference between an estate tax and an inheritance tax, you must look at when the tax is imposed. An estate tax is levied when a person dies, leaving their estate behind. Depending on the value of the estate, it may be exempt from tax, or it may not. The tax itself is assessed based on the current fair market value, not its original value.
An inheritance tax is levied on a person when they inherit a deceased person’s assets. It is paid by the beneficiary once the assets are passed down. Not all states have an inheritance tax, and it is imposed based on the value of the assets received by the beneficiary or heir.
What is the main purpose of tax planning?
If you want to minimize your tax liability, you should consider investing in tax planning. The process involves looking at your existing finances and determining how you can make changes so that you owe less to the IRS. In turn, you will be able to keep more so that you can take advantage of long-term investments and/or put the additional funds toward immediate needs for you and your family.