Tax planning considers the tax implications of individual, investment, or business decisions, usually with the goal of minimizing tax liability. While decisions are rarely made solely on their tax impact, you should have a working knowledge of the income or estate tax issues and costs involved. A major goal of tax planning is minimizing federal income tax liability.
This can be achieved by:
- Reducing taxable income through income deferral or shifting.
- By deferring (postponing) income to a later year, you may be able to minimize your current income tax liability.