Financial planning should be an ongoing process of any individual. However, many give less importance than required. The tax filing season is a good time to take steps towards financial planning and implementing ideas for progress. The PricewaterhouseCoopers 2008 guide to tax and financial planning provides essential tax and financial planning advise to individuals across all stages of life - young adult, families, and retirees, as well as for small businesses.
A summary of the significant regulatory and tax changes enacted during 2007 gives a succinct snapshot of the changes affecting tax payable and financial planning in 2008 and beyond. In order to get directly into the heart of tax and financial planning, the authors have relegated a primer on the various tax terms and fundamentals to a last chapter. However, this chapter is highly readable and helps to clear definitions both for a novice as well as an experienced planner.
In the first part of the book, separate chapters are allotted for important topics in financial planning including investments, retirement planning, home ownership, savings for education, health-care, estate planning, and charitable giving. The second part of the book builds on the concepts and issues highlighted previously as part of the tax and financial planning process.
Stocks have been an important part of individual portfolios due to their strong historical performance. The book also covers investment options in mutual funds, preferreds, and tax advantaged municipal bonds. Netting rules to offset losses against capital gains, protecting capital gains, handling qualified small business stock, short sales, margin accounts, and depreciated real estate are some of the highly practical planning issues discussed.
Retirement planning vehicles including 401K, 403, Keogh, and IRA accounts, and chief considerations in using these as part of an individual's financial plan are highlighted. The focus of the chapter is to discuss the tax impact of certain actions possible with insurance policies, rather than the fundamental aspects of insurance planning.
Home ownership and the tax planning benefits of mortgage interests, home equity loans, mortgage insurance, rentals, home office deductions, and planning for home purchases and sales are covered in detail.
Maximizing savings for education is an important aspect of financial planning for families given the sharp increase in education costs. There is a good overview of the various tax advantaged 529 plans and other options available for education financing in IRAs, savings bonds, home equity loans, and gifts. Tax benefits of student loans and tuition deductions are also explained.
Health-care savings accounts and options available for deducting qualified medical treatment, medical reimbursement, and flex spending accounts are covered.
Estate planning ideas include how to plan for the phase down in the estate tax after a description of estate and gift taxes. Must-haves including a will, reviewing property ownership structure to optimize taxes, death taxes, trusts, and usage of gifts including tuition for grand-children are discussed.
Charitable giving discusses options for availing of tax deductions while giving to one's preferred charity.
Year-end tax strategies draws upon the tax saving options that have been highlighted in previous chapters and uses these techniques in tax reduction, deferral, and income shifting strategies. The advice stresses on year end capital gains checkup and the Alternate Minimum Tax (AMT) diagnosis. With more and more families likely to get hit by the AMT, the book provides a clear description and computation of the AMT. From the point of view of a small business owner, business planning aspects of revisiting legal structure, retirement, compensation, succession planning, and buy-sell arrangements are discussed.
Correct emphasis is made on the fact that fundamental investment and financial considerations should take higher precedence over pure tax considerations. Not only does the book take each major aspect of tax planning and describes the relevant issues, it also follows up with an overall planning process which looks at use of multiple aspects together as part of an individuals financial plan.
Every chapter has numerous examples which highlight specific situations and how the tax laws apply in the case. Also, observations are included in light of these cases which highlight the usually profitable course of action to take in these scenarios. Several cases and recommendations make this a book one can be use to implement profitable ideas rather than just use as a "reference".
This book is well recommended for individuals and families seeking to enhance their finances by taking advantage of the myriad tax planning options available as well as for small businesses addressing their unique financial and business situations.
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