Every year, business owners, investors, and individuals look for ways to minimize their tax liability, maximize deductions, and avoid potential issues with the IRS. Achieving these goals often requires extensive, year-round tax planning. Taking the time to develop an investment strategy and identify potential deductions will reduce your exposure and simplify the process when you file. The following guide explains the benefits of planning ahead for the next tax year.

Maximize Deductions

Adopting a strategic approach to tax planning allows you to take advantage of deductions, especially if you plan to sell an appreciated asset or anticipate investment losses. Current law allows taxpayers to offset financial gains with losses, so a $100,000 loss in your investment portfolio will negate the tax liability on a $100,000 real estate sale. If you have suffered a loss, advance tax planning can help determine the best time to liquidate assets or make new investments.

Maximize Retirement Income

Planning your tax strategy in advance also allows you to make the most of your retirement savings, including investment vehicles like 401(k)s. Because contributions to these accounts come from pretax income, contributing the maximum allowed under the law will significantly reduce your liability and help you meet your retirement savings goals.

Eliminate Errors

Waiting until the last minute to collect documents and begin preparing to file creates opportunities for errors such as omitting major purchases and income sources. Neglecting to claim a deduction you qualify for means paying unnecessary taxes, while failing to claim income may result in an IRS audit. Approaching taxes and record-keeping as a year-round project will reduce the stress of filing and prevent mistakes that routinely cost taxpayers money. You may also want to work with an accountant who can identify credits and deductions you may have missed, ensuring the greatest accuracy.

When you need tax planning assistance from a skilled professional, you can rely on Daren Katayama, C.P.A., L.L.C. in Kailua Kona, HI, for high-quality advice tailored to your individual or business needs. Visit the firm’s website for more information about the wide range of services they offer, or call (808) 329-6635 to schedule an appointment with a skilled tax advisor today.