Multi-Year Tax Planning: Strategies to Help You Keep More of What You Earn

A business has a strong year. An investment is sold. Retirement withdrawals begin. When several income sources overlap, the result can be a larger tax bill than you expected.

That’s why proactive tax planning should look beyond your next tax return. Multi-year tax planning considers your income, deductions, and financial goals over several years to help you make informed decisions today—and prepare for what comes next.

Here are three strategies to consider.

1. Balance Income Across Years to Manage Your Tax Bracket

Your income may change significantly from one year to the next, especially if you own a business, receive bonuses, or are approaching retirement. When you have flexibility over timing, spreading taxable income across years may help reduce your overall tax cost.

Moving into a higher tax bracket does not mean all your income is taxed at that higher rate. The higher rate applies only to the portion within that bracket. Even so, thoughtful planning can help you manage how much income falls into those higher brackets.

Planning opportunities include:

• Reviewing whether flexible income can be recognized in a lower-income year.

• Considering planned retirement withdrawals before required minimum distributions begin.

• Avoiding overlapping taxable withdrawals, investment gains, and other major income events when possible.

• Projecting future retirement income so you can prepare for required withdrawals.

Required minimum distributions, or RMDs, generally begin at age 73 or 75, depending on your birth year. Understanding when yours will begin is an important part of retirement planning.

2. Coordinate Income With Available Losses and Deductions

Expecting a larger bonus, increased business profits, or an investment sale? Reviewing available deductions and losses before that income arrives may help you make better use of tax-saving opportunities.

Planning opportunities include:

• Reviewing realized investment losses and capital loss carryforwards before selling appreciated investments.

• Considering whether grouping charitable contributions into one year could make itemizing more beneficial, subject to applicable deduction rules.

• Reviewing the timing of necessary business expenses and equipment purchases.

Capital losses generally offset capital gains. For individuals, net losses beyond those gains are subject to annual deduction limits, with unused amounts generally carried forward.

For business owners, qualifying equipment may be eligible for accelerated deductions, but purchasing it alone is not enough—it generally must be placed in service. Eligibility and deduction limits also matter.

The goal is to coordinate expenses you already need with a tax strategy that supports your business and cash flow.

3. Plan Which Income Sources to Use Each Year

When you have multiple income sources, choosing which accounts to draw from can affect your tax bill. Taxable retirement withdrawals and investment gains may receive different tax treatment, so the timing and combination deserve attention.

Planning opportunities include:

• Coordinating retirement withdrawals with salary, bonuses, and business income.

• Reviewing investment holding periods before selling.

• Considering how additional ordinary income could affect the tax rate on long-term capital gains.

• Comparing available income sources before making a large withdrawal or sale.

Long-term capital gains may qualify for lower rates than ordinary income, but the applicable rate depends on your overall taxable income. Looking at these sources together can help you avoid unnecessary tax costs.

Start Your Tax Planning Before the Year Ends

The best time to review a financial decision is before it becomes a completed transaction. Whether you’re growing a business, preparing for retirement, or planning a major sale, a multi-year approach can help you understand your options and prepare for future tax obligations.

At Cohn, Lopez & Associates, we provide proactive tax planning for individuals and businesses, bringing tax, accounting, and retirement planning together to support your financial goals. Our office is located in Winter Park, with in-person and virtual appointments available.

Let’s discuss what’s ahead and build a tax plan around your needs.

Call 407-960-3652 or schedule an appointment.