Tax Planning


DEFINITION of 'Tax Planning'

Logical analysis of a financial situation or plan from a tax perspective, to align financial goals with tax efficiency planning. The purpose of tax planning is to discover how to accomplish all of the other elements of a financial plan in the most tax-efficient manner possible. Tax planning thus allows the other elements of a financial plan to interact more effectively by minimizing tax liability.

BREAKING DOWN 'Tax Planning'

Tax planning encompasses many different aspects, including the timing of both income and purchases and other expenditures, selection of investments and types of retirement plans , as well as filing status and common deductions. However, while tax planning is an important element in any financial plan, it is important to not let the "tax" tail wag the financial "dog." This can ultimately be counterproductive, as virtually all courses of financial action will have some tax consequences, and they should not be avoided solely on this basis.

  1. Taxes

    An involuntary fee levied on corporations or individuals that ...
  2. State Income Tax

    Tax levied on income at the state level. State income taxes have ...
  3. Income Tax

    A tax that governments impose on financial income generated by ...
  4. Tax Deferred

    Investment earnings such as interest, dividends or capital gains ...
  5. Federal Income Tax

    A tax levied by the United States Internal Revenue Service (IRS) ...
  6. Quid Pro Quo Contribution

    A charitable donation for which the donor receives something ...
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