What’s certain? Death and taxes. What’s up to you to control (to some degree)? When you die and how much you pay in taxes. Tax planning is crucial for your financial independence and is how you go from losing to winning the tax game.

Tax planning isn’t just about looking through the rear window and writing down what happened (many tax preparers focus solely on the past); it’s about strategically managing your finances to reduce tax liabilities and increase your savings as you look forward through the windshield to where you want to be five, ten, or forty years into the future.

Here are a few times tax planning is essential:

Legacy Planning:

• Thinking about your family’s tax burden over multiple generations helps clarify which strategies to pursue – and when. Do you have kids or grandkids? How will this legacy impact their taxes?
• If you have room in your tax bracket (your financial advisor can help you know) then consider Roth conversions* to help your heirs receive a blessing, not a tax burden.
• Have you moved across state lines since you last created or updated your will or trust? If you’ve moved across state lines, or plan to, make sure your financial advisor reads through your estate documents.

Just last year I spotted a $300,000+ tax time bomb for someone who moved but didn’t update their estate plan. Their estate attorney didn’t catch that – they didn’t have the tax training.  The CPA didn’t catch that – they didn’t even ask to look at the estate documents. 

Investment Strategies:

Tax-efficient investment strategies can help you grow your wealth faster by reducing the taxes you pay on investment gains. High interest rates means you’re likely collecting more taxable interest on your savings. Have you asked about options for tax-free interest? Do you need to? 

Retirement Planning:

Don’t just diversify your investments, diversify your taxes. Retirees who have choices on which kind of account to pull distributions from appreciate the flexibility to monitor their taxes year by year. But this doesn’t happen by accident – plan now to diversify your taxes in the future.

A few weeks ago I suggested someone tweak their savings strategy. By adjusting which account their savings are going into they’ll save over $20,000 in taxes during the next several years.

This August take a step towards preserving your financial future by considering your tax planning strategies. Here’s to winning the tax game and your financial independence!

*Roth Conversions Disclosure: Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.

This article was written by Caleb Stapp, owner of Deep Creek Financial Planning. You can reach Stapp at 509-241-8306 or [email protected] and get fresh financial tips in your email each month. Caleb Stapp is a Registered Representative with, and Securities and Advisory Services are offered through, LPL Financial, a registered investment advisor. Member FINRA/SIPC.