A Guide to Tax Planning Strategies: Tips, Steps, and Resources in 2023

Taxes are a necessity. Just as you don’t want to spend too much on necessities like food and shelter, you only want to spend what you need on taxes. The key to thrifty shopping is to research and have a good spending plan. The same thing goes for minimizing tax bills.

Tax planning strategies are made more important by the tax code’s complexity. New taxpayers may need help understanding unfamiliar areas such as liability, deductions, and financial solutions to protect assets and save for the future.

Fortunately, a little time spent mapping out tax planning strategies has many benefits beyond tax savings. This process helps individuals and small businesses manage their finances more efficiently, reducing total capital outflows and putting more money in their pockets.


In addition to saving money, tax planning strategies help taxpayers to avoid any tax penalties, get the most out of tax deductions, organize their financial records, and plan for the future. On the other hand, failure to tax planning takes money away from other life necessities by unnecessarily increasing the tax bill. As a result, college students are especially vulnerable to unwarranted taxation:

Their parents no longer claim them to be dependents on their tax returns, and they have to take on student debt. Here are some ways tax planning benefits students, other individuals, and businesses, as well as an overview of the consequences of poor tax planning.


According to data analyzed by Savingforcollege.com, 69% of bachelor’s graduates from U.S. colleges and universities in 2019 had student loans, and their average student loan debt was $29,900. In addition, Forbes outlines four tax credits and deductions for recent college graduates and families with children in school. (A tax credit reduces a student’s tax amount, while a deduction reduces taxable income.)

  • U.S. Opportunity Tax Credit:

The American Opportunity Tax Credit (AOTC) program provides an annual tax credit of $2,500 to each eligible student for qualifying educational expenses, such as tuition. In addition, students who do not owe taxes can receive 40% of the credit, or $1,000, as a cash refund. (Note that AOTC has a maximum term of four years.)

  • Lifetime Learning Credits:

The Lifetime Learning Credit (LLC) program offers up to $2,000 to reimburse students for tuition, fees, and other qualified educational expenses. The LLC program does not offer cash refunds to tax-exempt students. In addition, the program has no limit on how many years it can be claimed.

  • Tuition deduction:

The IRS explains that students can deduct up to $4,000 from taxable income each year to offset tuition and fees. However, as with the LLC program, the deduction is unavailable to students who do not owe taxes. In addition, the deduction does not apply to tuition fees.

  • Student loan interest tax deduction:

A student or parent who has made a qualifying student loan payment can deduct up to $2,500 in the interest they paid on loan during the tax year. The deduction applies even if additional payments were made to the loan during the year.


According to Investopedia, tax planning analyzes one’s finances to achieve “maximum tax efficiency,” according to Investopedia. The analysis takes into account many factors:

  • Time of income
  • time of purchase
  • Expense planning
  • Retirement Savings Strategies
  • Tax status and deductions

A tax planning strategy becomes part of an overall plan for spending and allocating retirement and other savings. It allows you to proactively spend and save rather than react when your tax bill is due.


The key to small business tax strategy is understanding the four types of Corporate Tax Uae the federal government levies, as The Balance explains:

Income tax, self-employment tax, employer tax, and excise tax. Once they’ve gathered all the necessary tax forms, businesses need to make sure they’re maximizing all available tax credits and deductions:

  • Small business health care tax credit

The Small Business Tax Credit is for small businesses with at most 25 full-time employees. The average employee salary is typical $50,000 or less, and the company must pay at least 50% of the employee’s health insurance premiums. Coverage must be available to all full-time employees.

  • Work Opportunity Tax Credit

Businesses that employ people from categories experiencing major barriers to employment can claim the Work Opportunity Tax Credit. Groups include eligible veterans, former prisoners, vocational rehabilitation referrals, Supplemental Nutrition Assistance Program (SNAP) recipients, and long-term family support recipients.

  • Tax relief due to coronavirus

Among the programs designed to relieve businesses impacted by COVID-19 include the Employee Retention Credit, the Family First Coronavirus Response Act, and the Loss Transition net from Operating Activities (NOL) of C Group.

CONSEQUENCES of not planning your taxes

Individuals and businesses risk paying more tax bills than needed due to a lack of tax planning strategies. If they fail to pay their taxes on time, the IRS will impose penalties and interest on the unpaid amount until the balance is paid in full. The IRS imposes penalties for several reasons:

  • Failure to submit an application
  • Failure to pay on time
  • Failure to pay appropriate estimated tax
  • Checks rejected

For small businesses and the self-employed, the IRS offers some penalty waivers where efforts have been made to comply with tax requirements. Still, tax obligations need to be met due to unrelated circumstances. To the will of the taxpayer. Here are some penalties that may qualify for mitigation:

  • No tax return
  • Failure to pay on time
  • Failure to comply with the obligation to pay certain taxes


The adage “Watch every penny and the money will take care of itself” applies double to personal tax planning strategies. Students, recent graduates, and others struggling to make ends meet can reduce their tax liabilities by taking advantage of tax savings opportunities available to people of all income types. 


The IRS defines a dependent as an eligible child or parent:

  • A dependent child is a son, daughter, stepchild, adopted child, brother, sister, half-brother, or half-sister under the age of 19 at the end of the tax period or under 24 if students are subject to tax declaration.
  • To be considered a dependent child, the person must have lived with the preparer for more than half a year, received more than half of the child support payments, and cannot file a joint return, except when claiming a refund. Tax withheld. Or an estimate of the amount of tax paid.
  • Dependent relatives must be related to the preparer in various ways, live with the preparer for the entire year, and have a gross annual income of less than $4,200.
  • The applicant must provide more than half of the dependent parent’s total child support for the year.

Three criteria must be met for a qualifying child or qualifying parent to be claimed as a dependent:

  • Check for dependent taxpayers

Taxpayers who claim someone as a dependent cannot claim someone else as a dependent. 

  • Check the same back

Someone cannot claim a married person as a dependent if the married person files jointly, except to claim a refund of withheld income or an estimated tax payment.

  • Citizenship or permanent resident test

Only U.S. citizens, resident aliens, U.S. citizens, or residents of Canada or Mexico can be considered dependents, except adopted children.

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