Each have their advantage in specific situations. Marginal Rates -At certain levels of taxable income, the tax rates increase. This is commonly referred to as tax brackets. It therefor, could be to your advantage to shift income or expense from one year to another to keep yourself in a lower tax bracket. Investment Strategy -There are times when you may want to buy or sell investments to take advantage of taxable gains or losses.
Capital gain tax rates are better than ordinary income tax rates.
These plans allow you to save money for retirement by deferring the income tax - earn it now but pay tax on it later. All have a place in tax strategy. Education Costs - There are now tax benefits available to help pay for college and these also can help your tax strategy. Business - If you own your business, the legal form of organization can help your tax strategy. Home Office - More and more people are working out of their homes and therefore this can effect tax strategy.