Tax basics: How to Plan Year-Round

Tax planning

Tax planning involves looking at your financial plan, portfolio, and overall situation from a tax perspective—ideally, on a year-round basis. The purpose is to help you avoid unnecessary taxes—so you can keep more of your earnings. 

Good tax planning can help all the pieces of your financial plan work together for the best possible tax outcome, based on your specific goals and your tax filing status. It can also help you:

  • Get all the deductions and credits you qualify for
  • Avoid costly filing mistakes
  • Make proactive, tax-smart decisions all year long
  • Take advantage of tax-smart strategies when they make sense for you


Ask yourself six tax planning questions that could save you money.

Tax planning

Start by learning about taxable income and income taxes

If you have income over a certain amount, the IRS requires you to pay federal income taxes. Most states and some local governments (like counties and municipalities) also collect income tax. 


This is far from an all-inclusive list, but income that should be reported on your federal tax return usually begins with:

  • Earned income

    Wages, salary, tips, commissions, bonuses, self-employment income, union strike benefits, certain disability payments, other taxable employee compensation

  • Unearned income

    Retirement account withdrawals, Social Security income, pension income, capital gains, dividends, interest, U.S. savings bonds

  • Other taxable income

    Unemployment pay, prize, gambling, or lottery winnings, alimony payments (if the divorce was final before 2019)

However, there's also income you may not have to pay taxes on:

  • Gifts or inheritances you receive
  • Child support
  • Life insurance proceeds (after the insured person's death)
  • Interest from municipal bonds (may be subject to alternative minimum tax and state tax for out-of-state bonds)
  • Disability income (if you paid the premium with after-tax dollars)
  • Certain employee benefits

In the meantime, consider learning more about how taxable income and federal income taxes are calculated or reaching out to your tax professional or


Gift image

Consider your qualified deductions and credits throughout the year

There are many deductions and credits you may qualify for based on IRS rules. Both can reduce your tax bill and put money back in your pocket. But each operates differently.

Tax deductions

These can reduce your total taxable income. So, a smaller amount will be used to calculate your taxes. 


Let's say you're single and your total income for the year was $80,000. If you take the standard deduction ($14,600 in 2024), your taxable income will be $65,400. The IRS will use this smaller amount to calculate your taxes. Less income usually means less tax.

Tax credits

These can reduce your total tax bill dollar-for-dollar. So, a $1,000 tax credit could reduce the taxes you owe by up to $1,000.


Let's say your total tax bill is $4,500 after all deductions and before tax credits. If you have an eligible child, you could qualify for the $2,000 Child Tax Credit. This would reduce your total tax bill by $2,000, so your total tax due would be $2,500.

To avoid leaving money on the table, here's what we recommend:

Want to avoid leaving money on the table? Consider these steps.

  • Start planning early:

    Waiting too long to determine which tax breaks are available can cause you to miss out. For example, the IRS allows you to contribute to a tax-deferred 401(k) plan, which directly reduces your taxable income. But you must do this by December 31 to get the benefit on this year's tax return.

  • Find out if itemizing deductions is worth it:

    Each person (or couple) who files a tax return is generally eligible to receive a standard deduction that can reduce their taxable income. But if you had certain expenses, itemizing your deductions might save you more in taxes. Some expenses that can be itemized include certain medical and dental payments, charitable donations, and up to $10,000 in state, local, and property taxes. You may also be able to itemize some or all of your home mortgage interest.

  • Explore tax breaks that don't require itemizing:

    These include deductions for up to $2,500 in student loan interest, $300 in expenses for teachers, and up to $3,000 for capital losses. And don't forget these common credits—the $2,000 Child Tax Credit (per child), child and dependent care credit, adoption credit, American Opportunity Credit, Lifetime Learning Credit, and the foreign tax credit.

  • Consider expert help

    Connecting all the dots between the tax rules and your specific goals and situation can be difficult. For a better potential outcome, consider talking to a tax professional Tooltip in your local area. 

What you can do next