6 Reasons You Should Combine Tax Planning and Financial Planning

Financial freedom depends on both tax planning and financial planning. However, 42% of people don’t feel like they even have enough money for a financial plan even though a little money can go a long way with the proper plan in place. If you’re working with a financial or tax planner, it’s crucial to combine the two to reach your financial goals.

Why is this the case? Well, that’s what we’ll be diving in to in today’s blog! 

Note: If you don’t have a financial planner yet and don’t understand the value they create, be sure to read our recent blog post.

6 Reasons You Should Combine Tax Planning and Financial Planning

1. Financial Advisors Already Understand Your Financial Life

If you’re like most people, you don’t go around telling everyone about your financial life. However, if you have a financial advisor, it’s their job to know just as much about your finances as you do.

These professionals have a comprehensive view of your financial life, and they can help you plan for your future tax burden.

Many people only think about their taxes in April, when they have little to no time to make adjustments to lower their tax burdens. When you combine tax planning and financial planning, you:

  • Plan your taxes over the entire year
  • Align your tax and financial planning for long-term tax savings
  • Run projections to have a clear picture of your future financial wealth

Tax planning is a long-term strategy that allows you to make smarter financial choices to reduce current and future tax burdens. Since your financial planner already knows your financial situation and income streams, they can work to reduce your tax burden faster and more efficiently than if you worked with two separate professionals.

2. Tax Planning Helps You Remain Financially Stable

Most people don’t realize that they may need to pay taxes on their Social Security benefits. In fact, in 1984, less than 10% of people paid taxes on their benefits. However, today, over 50% of beneficiaries pay taxes on their benefits.

Tax planning helps you not only be aware of what taxes you can expect to owe in the future, but it also helps you reduce your tax burden so that you keep more of your income in your pocket.

Additionally, when you plan for future tax burdens, you can:

  • Leverage tax advantages that exist today and might not exist tomorrow
  • Strategize to reduce taxes when you retire 
  • Avoid tax-deferred financial vehicles when they’re not preferable 

A few of the many ways that combining tax and financial planning can boost your financial stability are through tax-loss harvesting, asset allocation, and withdrawal strategies that focus on tax efficiency.

3. Tax Planning Improves Investment Strategies

Your tax plan can improve your investment strategy, which your financial planner knows all about. For example, using tax-loss harvesting, it’s possible for you to:

  • Realize a loss on your portfolio
  • Offset capital gains
  • Rebalance your portfolio

Each security has its tax advantages or disadvantages. When your financial planner works on asset location, they can also consider the tax ramifications of each security (such as investing in bonds, EFTs, stocks, etc.) and which account (such as a traditional IRA, 401(k), Roth IRA, etc.) is optimal to hold the investment.

Minimizing potential taxable income before and in retirement allows you to improve your investment strategy.

4. Save Money Through Proactive Tax Planning

Tax planning saves you money, and while we’ve mentioned the investment side of tax planning, you can save money in a variety of other ways, too. For example, a tax planner can reduce your tax burden by leveraging:

  • Tax credits to lower your adjusted gross income to stay in lower tax brackets
  • Tax-advantaged donation strategies, such as donating money to charities using qualified charitable distributions (QCDs)
  • Running projections to find ways to lower tax burdens or prepare for them if they’re unavoidable
  • Roth conversions at the right time to help you grow your money tax-free

Proactive tax planning gives you the necessary insight and time to make smarter financial decisions that lower your overall tax burden. When you combine both financial and tax planning using a proactive approach, you’ll save more money in the long term while having an easier time reaching your financial goals.

For example, you may have an estate plan that leaves beneficiaries with a major tax burden. If you’re working with a CPA and financial advisor who understand your estate plan, they can work to shield your heirs from high tax burdens, too. Proactive tax planning works to find key ways to save you money today and in the future.

5. Tax Planning Increases Wealth Accumulation

Wealth accumulation is the job of a financial planner, and the job of a tax planner is to save you money. When you combine the two together, you can accumulate greater wealth by saving more money to funnel into your investments.

For example, you can accumulate more wealth by:

  • Funding Roth accounts when your tax burden is lower
  • Leveraging low tax years to convert traditional IRAs to Roth accounts
  • Reducing or avoiding all unnecessary capital gains

If you’re reinvesting the money that you save in taxes, you’ll accumulate wealth faster and pay less taxes in the process.

6. Boost Consistency in Service

Financial advisors rely on you to paint a clear picture of your finances. If you leave documents out that maybe you didn’t even know need to be sent to an advisor or leave out important information, it can leave an unclear picture of your financial health.

When these two professionals work together or are the same person, it leads to consistency. Combining services will maximize opportunities to save and grow your money year after year. A CPA and financial advisor working together is in your best interest because they’ll align their goals and plans to secure your financial freedom.


In the ideal world, you’ll work with professionals who combine tax planning and financial planning to maximize your financial health. Taxes are something that almost all of us owe as individuals, but when you create a smart financial and tax plan, you can grow your wealth efficiently and effectively, while lowering your tax burden.

To learn more about how KPN Enterprises can help you with tax planning and financial planning or to schedule a call, contact us here