Tax Planning in 100 Words

By Kaye A. Thomas
Current as of July 4, 2016

Tax planning may seem like an arcane topic, but the key ideas can be summarized in 100 words.

Tax planning means arranging one’s affairs to achieve a favorable tax result. The most common goals are deferral (paying in a later year what one would otherwise pay this year) and lower tax rates, which are available for long-term capital gains and qualified dividends, Roth retirement accounts, exempt bonds, or from shifting income into years when lower rates apply. Tax planning can also have financial impact outside the tax system, as when income is used to determine student financial aid or Medicare premiums. Much of tax planning revolves around the timing of deductions and management of retirement and investment accounts.

See also: Investing in 100 Words