Four Tax Planning Tips for Successful People

Portrait of happy young friends touching the glasses with each otherTax planning is the process of analyzing the financial situation from the tax point of view, to be able to estimate the tax liabilities and formulate ways to ensure tax efficiency. In simple words tax planning is the art of deferring your taxes, in as much as possible, by taking advantage of the beneficial tax-law provisions.  Tax planning is an essential element of a business plan and financial plan.

Tax planning can make a difference in the finances; therefore, have an impact on an individual’s standard of living now and in the future.  It is important to keep in consideration that not all benefits available fit everyone’s unique situation.

Here we are sharing some tax planning strategies that successful people apply and may be of your benefit.

  1. Use your money in tax efficient investments:
    Investors want low taxes for their risk taken.  Therefore, they usually seeking capital gains which may yield a max tax rate of 15 – 28%, opposed to ordinary tax rates as high as 36-39.6% (depending on President Trump’s tax reforms).Investors should also consider not only the size of their income or profits, also the time and nature of purchases and the type of investment they make. There are different investment options available. Every decision can affect your tax bracket and the type of tax deductions you qualify for. When looking to investment, the best decision may be to contact a financial professional to find out the most tax-efficient investment for you.
  2. File correctly to avoid issues for household employees:
    For tax purposes a household employee is an individual who provides domestic services for you in and about your home, and when you control what work the person is to do, how and when is to be done.  You must withhold taxes from your household employee’s’ wages, and match the amount you withhold for Social Security and Medicare taxes from your employee when filling the tax-return with the State and the IRS.
  3. Buy life insurance:
    Life insurance may be one of the “great creators” for family wealth.  Life insurance could be looked as a way to provide the beneficiary with a tax-free income, pay off debt, or to replace the insured’s income during a difficult time. A permanent life insurance policy provides the death benefit plus a cash-value component that can allow the holder to escalate an amount of tax deferred saving over time. The tax benefits to receive will depend on the specific coverage plan.
  4. Earn interest instead pay them:
    Interest can be a double edged sword.  It can either be a cost for using someone else’s money, or an easy benefit if earned.  It is calculated as a percentage established on the terms and conditions of the negotiation. A borrower pays interest, as a lender earns interest. When you have funds available it is of great benefit to deposit them into an account that generates daily, monthly or quarterly interest income. This way you earn money.On the other hand, there are cases when individuals with idle funds available are paying monthly interest in their mortgage; these cases need special attention, the interest on the mortgage are generally higher than the interest earned on a saving account or possibly investment account.  The general rule to follow is to earn interest as opposed to paying it due to the concepts of exponential interest earned upon interest.  The most appropriate step is to call your financial advisor and discuss your situation to get the most out of your money.
  5. Create a succession plan:
    Your mission: Plan not to work.  Succession planning is a process for identifying and developing new leaders who can replace old leaders when they leave, retire or die. In business, it entails developing internal employees with the potential to fill key business leadership positions in the company, in order to continue a profitable business mission established by the previous owner(s); allowing the business owner to sell or transfer the business successfully.


Everyone situation is different, an effective tax plan strategy would allow you to do what you want with your money while reducing taxes. If you are interested in tax planning give us a call, we’ll advise you to follow the options that best fit your overall financial situation. We, at Rosillo & Associate want to make sure our clients are successful, with what they have.


Posted in Tax Planning