Tax Planning
Tax Planning For a Prosperous Future
The goal of tax planning is to ensure that all elements of your financial plan work together to allow you to pay the lowest taxes possible. A tax efficient plan minimizes how much you pay in taxes and frees up money to put to use in building a prosperous future.
At WestStar we believe that tax planning should happen throughout the year, not just when it’s time to file. After all, taxes can have a major impact on your financial and investing plans.
All financial and investment decisions you make have a tax impact, and there are steps we can take to reduce your tax bill as you build out your financial plan.
Financial planning and tax efficiency go hand-in-hand. Tax impacts all aspects of your financial life, and should be an essential part of every individual and investor’s financial plan.
Tax planning allows our advisors to plan and execute efficiency strategies on your tax return and help you plan out your tax situation over the long term.
Your tax planning strategy can make a big difference to the way you live: it can put more money in your pocket, keep your investments efficient, save you money on retirement withdrawals, help you to give more to charity, and maximize your estate.
We help you understand all tax considerations you need to take into account for your financial and investment decisions ahead of time. By working with us all year round, we will let you know when emerging tax issues call for changes in your financial plans.
Tax efficiency is vital when your time comes to collect Social Security. WestStar Advisors provide retirement income planning strategies, help you decide the best time to take benefits, and show you how to stay within tax brackets. This may mean working in concert with your tax advisor to deliver integrated advice.
If you are looking for a personal tax planning strategy for a prosperous future.
Income Tax Planning Frequently Asked Questions
Personal Tax planning is the practice of analyzing and arranging your finances to legally minimize your tax liability, maximize your wealth, and achieve your financial goals. By reducing your taxable income and maximizing tax deductions, you are able to make the most of your financial resources.
Tax planning, or tax-effective investing, is a process to minimize the amount of tax you owe on your income, assets, and wealth. A proactive tax strategy helps individuals and businesses save more of their money while making informed financial decisions.
In its simplest form, tax planning involves analyzing your financial plan to ensure it is optimized to reduce your overall tax liability. Implementing effective tax strategies can help you secure financial wellness and meet your short- and long-term goals.
Tax planning is more than just keeping financial records and sending them to your tax accountant once a year.
Tax planning is the year-round act of:
- Conducting a careful analysis of your income, investments, expenses, and potential deductions or credits
- Reviewing tax laws, rules, and regulations
- Using that knowledge to make decisions throughout the year that can legally minimize the amount of taxes you owe while remaining compliant with tax laws
- Tax planning helps to minimize tax liability, maximize wealth, and achieve financial goals by reducing taxable income and maximizing tax deductions, credits, and exemptions.
- Tax Planning can also help to avoid penalties and comply with tax regulations.
- Tax Planning ensures that individuals and businesses are proactive in managing their finances.
- It is advisable to consult a tax professional or financial advisor who can help you plan your taxes more effectively.
Because the economy, tax laws and your life continually change, taking time to review your financial and tax situation could help you (and your family) keep more of what you’ve earned. While some strategies apply to the current year, others involve anticipating changes to come.
For these reasons, it pays to stay updated regarding tax law changes, because there are many opportunities to maximize your savings through tax-efficient approaches to things like estate planning, investing for retirement, adjusting to market volatility and others.
Ask your financial advisor and tax advisor whether they might make sense for you.
1. Review your gift and estate plans
Deep cuts in gift and estate tax exemptions are scheduled to kick in at the end of 2025. You need to familiarize yourself and chat to a financial advisor or ask your personal tax advisor whether these exemptions might make sense for you.
2. Consider offsetting investment gains with losses you’ve experienced (tax harvesting)
If you have sold stocks that performed especially well in the past year, you might consider offsetting those gains with losses you’ve experienced elsewhere in your portfolio. This is called tax loss harvesting.
3. Max out your retirement plan
Consider increasing your 401(k), IRA or any other (qualified) retirement plan contributions to reach the maximum contribution amount. This offers both the possibility of increasing your retirement savings, and potentially lowering your taxable income.
The IRS has raised the 401(k) contribution limit to $23,500 for 2025, while the IRA contribution limit remains at $7,000.
4. Consider converting your traditional IRA to a Roth IRA
Under existing federal tax law, anyone can convert all or a portion of their assets in a traditional IRA to a Roth IRA. The deadline for doing so is December 31.
Qualified distributions of converted amounts from a Roth IRA aren’t generally subject to federal income taxes, as long as five years have passed since the first of the year of your first Roth IRA contribution (or conversion) and you are age 59½ or older.
5. Look for tax-aware investing strategies
Putting a portion of your income into investments not generally subject to federal income taxes, such as tax-free municipal bonds, could potentially ease your tax burden.
6. Start thinking about tax changes coming in 2026
In addition to the gift and estate tax exemption mentioned above, the expiration of the Tax Cuts and Jobs Act will bring a number of other tax changes for individuals in 2026. For example, the top individual income tax rate will jump from 37% to 39.6%. The $10,000 cap on state and local tax deduction will expire, creating more reasons to itemize your deductions.
Some of the most basic tax planning strategies include reducing your overall income, such as by contributing to retirement plans, making tax deductions, and taking advantage of tax credits.
Tax planning strategies aim to lower the taxes that you need to pay. There are many ways in which to do this. These include utilizing retirement plans, holding on to investments for more than a year, and offsetting capital gains with capital losses.
What are the goals and considerations of tax planning strategies?
- Tax planning is the analysis of your financial situation or plan with the goal of ensuring that all elements work together to allow you to pay the lowest taxes possible.
- Considerations of tax planning include the timing of your income, the timing of purchases, and planning for expenditures.
- Tax planning strategies can include saving for retirement in a 401(k) or IRA, or engaging in tax gain-loss harvesting (offsetting the gains in your portfolio with losses you’ve experiences elsewhere in your portfolio).
What is the main strategy to use to reduce taxes?
- There is no one strategy: rather, there are many ways to reduce taxes that are available to all earners. These include contributing to retirement accounts, contributing to health savings accounts (HSAs), investing in stocks with qualified dividends, buying muni bonds, and planning where you live based on the favorable tax treatment of a specific state.
Can I Contribute to a 401(k), a Traditional IRA, and a Roth IRA?
You can contribute to a 401(k), a traditional IRA, and a Roth IRA as long as you ensure that you don’t exceed the legally allowed amount per year. If you invest in both a traditional IRA and a Roth IRA, you cannot contribute more than the overall maximum allowed for an IRA.