Tax Planning Starts Now: 7 Strategies to Reduce Your Tax Bill
If you’re thinking about taxes only when it’s time to file your return, you may be missing some of the best opportunities to reduce what you owe.
Tax planning is something you can do throughout the year. In fact, many of the biggest tax-saving strategies require advance planning. Waiting until the last minute can limit your options, especially if you own a business, had a big change in income, sold an investment, or gone through another major life or financial event.
At Fair & Co CPAs, we help individuals and business owners look beyond simply preparing a tax return. Good tax planning means looking at what’s happening now and making informed decisions that can put you in a better tax position later.
Jamie McFadden, CPA, Tax Manager at Fair & Co CPAs lays out a few strategies worth considering:
1. Review Your Estimated Tax Payments
If you’re self-employed, own a business, or have income that doesn’t have taxes withheld, estimated tax payments may be part of your tax picture.
The goal isn’t necessarily to pay as much as possible throughout the year. It’s to pay the right amount and avoid an unexpected tax bill or potential underpayment penalties.
If your income is variable, your business has changed, or you’ve picked up additional investment income, it’s worth reviewing your estimated tax payments. The goal is to make sure you are at least meeting your safe harbor based on the prior year tax (either 100% or 110% depending on income level).
2. Make the Most of Retirement Contributions
Retirement accounts can be an important part of both your long-term financial plan and your tax strategy.
Contributing to a traditional IRA, 401(k), SEP IRA, SIMPLE IRA, or another retirement plan can lower your taxable income while building your long-term savings. Business owners often have more flexibility here - more plan options and higher contribution limits than a typical employee.
The right fit depends on your income, business structure, and age, so keep contribution limits and deadlines in mind. If you own a business, bring this up with your CPA before year-end - don't wait until filing season to find out you missed a window
3. Consider Charitable Giving
If charitable giving is already part of your financial plan, there may be ways to make those donations more tax-efficient.
For example, donating appreciated investments instead of cash lets you support the causes you care about and avoid capital gains tax on the appreciation. If you're making a larger gift, a donor-advised fund can let you bunch several years of giving into one tax year.
If you're 70½ or older, look at qualified charitable distributions (QCDs). These come straight from your IRA and reduce your taxable income even if you don't itemize.
Charitable giving should always start with your personal goals. The tax benefit is a bonus, not the reason
4. Look at Your Business Structure
For business owners, one of the biggest tax-planning questions can be whether your current business structure still makes sense.
An LLC, sole proprietorship, S corporation, and other structures carry very different tax consequences. The setup that made sense when you started your business isn't always the best fit once it grows.
For some business owners, an S corporation election lowers self-employment tax. For others, the added payroll and administrative work outweighs the savings.
Entity changes and elections come with real deadlines. Don't wait to find out you missed one.
5. Don’t Forget About Capital Gains and Investment Income
Selling an investment, property, or business changes your tax picture, sometimes more than people expect. Before you sell an appreciated asset, know how the timing affects your capital gains, your ordinary income, and your bracket for the year.
The same goes for selling a business or having an unusually high-income year. A jump in income doesn't just raise your tax bill, it can push you into a higher bracket and affect other parts of your return.
6. Take Another Look at Your Deductions
Business owners should track expenses as they happen instead of scrambling to find deductions at tax time. Mileage, equipment purchases, professional fees, retirement contributions, and everyday costs all add up. Good bookkeeping makes this easy and gives your CPA a clearer picture of your business all year.
For individuals, life changes drive most of the deductions and credits worth revisiting: buying a home, having a child, starting a business, or changing jobs.
7. Tax Planning Is About More Than Finding Deductions
One of the biggest misconceptions about tax planning is that it simply means finding more deductions.
Sometimes the best tax strategy has nothing to do with a deduction. It could mean changing the timing of income, making a retirement contribution, adjusting estimated tax payments, choosing the right business structure, or planning a large transaction carefully.
The earlier you start, the more options you typically have.
When Should You Start Tax Planning?
There's no reason to wait until December. A tax planning conversation now still gives you time to act before year-end. If you're expecting a big change in income, selling a business or investment, or starting a business, talk to your CPA even sooner.
At Fair & Co CPAs, our goal is to help clients make tax decisions with the bigger picture in mind. Tax planning can help you understand what you may owe, identify opportunities to reduce your tax liability, and avoid unpleasant surprises when tax season arrives.
If you’re looking for tax planning services or a CPA who can help you plan ahead, contact Fair & Co CPAs to start the conversation. A little planning now can make a big difference when it’s time to file!
About Jamie McFadden, CPA, Tax Manager at Fair & Co CPAs
Jamie McFadden is a CPA with 10 years of experience advising individuals and small to mid-size businesses in tax planning strategies. He takes pride in taking the mystery out of tax planning, with the goal being that every client can make decisions with peace of mind. He lives in Fulton, Mississippi with his wife Heather, and their two children.