Planning Well in Advance of a Transaction

From a tax and estate planning perspective, the most valuable opportunities often arise well before a business is formally brought to market. Early planning allows business owners to take advantage of strategies that may no longer be available once a transaction becomes imminent.

One key consideration is ownership structuring. Reviewing how the business is held, whether individually, through entities, or in trust, can uncover opportunities to improve tax efficiency and facilitate wealth transfer. For example, transferring minority interests in a business to irrevocable trusts for family members, when valuations are lower and before a sale is anticipated, may reduce future estate tax exposure. These strategies, often referred to as “pre-sale gifting,” can allow appreciation to occur outside of the owner’s taxable estate.

Trust planning also plays an important role. Properly structured trusts can provide asset protection, centralized management, and multigenerational wealth planning benefits. However, timing is critical. Once a letter of intent is signed or a sale becomes highly probable, the IRS may scrutinize transfers more closely, potentially limiting the effectiveness of these strategies.

From the deal side, “early” really means early. By the time a letter of intent is signed, the framework of the transaction is often set, and leverage begins to shift. Preparing in advance—cleaning up corporate records, evaluating contracts, and aligning ownership—can prevent delays and preserve negotiating strength.

Just as importantly, early coordination with tax counsel ensures that the business is positioned in a way that supports both marketability and tax efficiency. Buyers will conduct extensive diligence, and a well-prepared seller is better equipped to maintain momentum, avoid surprises, and command stronger terms.

Planning During the Transaction

Once a transaction is underway, the process moves quickly and becomes highly structured. Negotiations typically focus on key terms such as purchase price, representations and warranties, indemnification, and, critically, deal structure.

One of the most significant structural decisions is whether the sale will be an asset purchase or a stock purchase. Buyers often prefer asset deals for liability protection and tax benefits, while sellers frequently favor stock deals for cleaner exits and capital gains treatment. Navigating this tension is a central part of the negotiation process.

In addition, deal mechanics such as earnouts, rollover equity, and escrow arrangements can materially impact both risk allocation and overall value. These terms should be evaluated not only from a legal perspective, but also in light of their tax consequences.

That’s where tax planning continues to play a critical role during the deal itself. The structure of the transaction directly affects how proceeds are taxed, and careful analysis can help align the interests of both buyer and seller.

For example, in an asset sale, buyers may receive a step-up in tax basis, which can be highly valuable. However, sellers (particularly C corporations) may face double taxation. In a stock sale, sellers often achieve more favorable capital gains treatment, though buyers may be wary of inheriting liabilities.

Tax elections can sometimes bridge this gap. Certain elections allow the parties to achieve a hybrid result; providing buyers with basis step-up benefits while preserving favorable tax treatment for sellers. These opportunities require proactive analysis and close coordination with deal counsel.

A Coordinated Approach Delivers Better Outcomes

A successful transaction is not just about getting to closing—it’s about getting there efficiently, with minimal disruption and maximum value; and making sure you actually keep that value when it’s all said and done.

Together, a coordinated team of advisors can align transaction execution with tax efficiency and long-term wealth planning. Business owners who engage counsel early (and maintain that collaboration throughout the process) are best positioned to achieve a successful and well-planned exit.

For those considering a future sale, the takeaway is clear: start planning early, stay engaged throughout the process, and ensure your advisors are working together every step of the way.

For more information or to seek counsel from our Business & Corporate or Taxation practice groups, please reach out to request a consultation or call us at 216-696-1422.

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This information is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

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Why It’s Important

Although the releases do not change the tax law, they are important because they dictate how and when taxpayers can receive written guidance, including letter rulings, determination letters, and technical advice.

Revenue Procedure 2026-1: Letter Rulings and Determination Letters

Rev. Proc. 2026-1 explains the revised procedures for requesting letter rulings, determination letters, and information letters on federal tax issues issued by the Large Business and International Division, Small Business/Self-Employed Division, Wage and Investment Division, and the Tax Exempt and Government Entities Division. This procedure also outlines which IRS offices handle specific requests, the information required for submission, user fee information, and circumstances under which the IRS may decline to issue guidance.

Revenue Procedure 2026-2: Technical Advice

Rev. Proc. 2026-2 discusses Technical Advice Memoranda (TAMs), which can arise during IRS audits or examinations where IRS personnel request guidance from the National Office on how the law applies to a specific set of facts. The updated procedure explains when advice can be requested by the taxpayer, how to participate in the process, how the results are issued, and the rights a taxpayer has when a field office requests a TAM.

Revenue Procedure 2026-3: Domestic “No-Rule” Areas

Rev. Proc. 2026-3 addresses areas of domestic tax law in which the IRS does not issue letter rulings. These areas generally involve issues that are otherwise unsuitable for guidance. If a topic appears on a “no-rule” list, the IRS will typically decline to rule, though in some cases they may choose to provide information letters on the subject.

Revenue Procedure 2026-4: Tax-Exempt, Government Entities, and Employee Plans

Rev. Proc. 2026-4 addresses procedures for government entities, tax-exempt organizations, and employee benefit plans. This procedure supports Rev. Proc. 2026-1 by addressing the considerations that apply to these entities.

Revenue Procedure 2026-5: Exempt Organizations

Rev. Proc. 2026-5 focuses on determination letters for exempt organizations specifically. This includes applications for tax-exempt status and other exempt organization issues. It also addresses remedies available under Internal Revenue Code Section 7428, which grants specific organizations the right to seek a declaratory judgment from certain U.S courts regarding their tax-exempt status. It provides a procedure to resolve disputes over qualifications and aims to protect from litigation.

Revenue Procedure 2026-7: International “No-Rule” Areas

Rev. Proc. 2026-7 mirrors the domestic “no-rule” list from Rev. Proc. 2026-3, however this applies to international and cross-border matters.

Overall, the updates presented by the IRS in its Annual Revenue Procedure for 2026 don’t represent a substantive shift in law or policy, rather just an annual update. As with previous years and anything presented by the IRS, it’s important for taxpayers to understand these changes and when, how, and under what circumstances a taxpayer may seek guidance from the IRS. It’s important to consult your tax professional for guidance on how these updates can impact you.

For more information or to seek counsel from our Taxation group, please reach out to request a consultation or call us at 216-696-1422.

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[1] https://www.irs.gov/irb/2026-01_IRB

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This information is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

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Initial Meeting: “What Are The Basics?”

My initial client meetings typically involve those who are considering an attorney for estate planning, business planning, and/or tax planning. In this meeting, my job is to ask the right questions.

If you keep reading, and you find yourself thinking any of the following:

1. “I should probably know the answer to that.”
2. “We’ve been meaning to deal with this.”
3. “That sounds uncomfortably relevant.” 

Then, now is a good time for us to chat; a thoughtful and honest conversation about where you are and where you want to go.

Big-Picture & Goals: “Why Are We Here?”

When meeting with a new client, I like to get a handle on the big picture. The following questions are things to consider:

1. What prompted you to come in or reach out now? (A perfect answer would be, “I read an interesting blog that helped explain what I need and how to prepare in a comfortable way.”)
2. What are your top concerns when you think about your finances, family, or business?
   • Minimizing taxes
   • Protecting assets
   • Taking care of family
   • Maintaining control
   • Avoiding future disputes
   • All of the Above
3. What is it that you really want to fix?

The preliminary overview is often targeted at what you are specifically worried might go wrong if you don’t get a plan in place.

A whole host of reasons can be the initial trigger, be it a new child, the sale or impending sale of a business, realizing your “plan” is partly in a drawer at the office and partly in a three-ring binder from 1998, or you had a recent combative probate experience with a family member. 

Whatever the reason, we can first zero in on whether we’re solving an urgent problem, doing preventative planning, or cleaning up something that no longer fits.

Estate Planning: “Who Gets What, When, and How Much Drama Is Allowed?”

When it comes to estate planning, it’s really about people, hence the complications. Estate planning is very personal, and while I try to reassure clients that “I’ve seen it all,” it can be intimidating to share such intimate details.

When setting the stage for estate planning, I typically ask about:

1. Your spouse (current, former, or blended-family situations)
2. Your kids (ages matter, so do personalities)
3. Anyone you consider “family,” even if the law disagrees

Understanding the players involved helps create an overarching structure for effective planning.

When it comes to beneficiaries, the following are some examples of “special circumstances”:

1. Minor children
2. Special needs
3. Addiction issues
4. Spendthrifts
5. Someone who really shouldn’t receive a large lump sum at 25

Analyzing these aspects is important because equal is not always fair, and fair is not always tax efficient. Planning lets you protect people not only from themselves, but also from creditors, bad influences, or bad decisions.

Then we get to some of the harder choices – deciding who you trust to handle money and make decisions.  Even the best structured plans in the world can fail if the wrong person is in charge. Proper estate planning translates real life into a plan that works even when emotions run high, and you’re not around to explain yourself. Remember, estate planning isn’t just about assets; it’s about people with assets, and people can be…unpredictable.

Business Planning: “How’s the Money Made and Who Could Mess It Up?”

When it comes to business, I go right to structure. I want to know:

1. Entity type (LLC, S Corp, C Corp, Partnership, Sole Proprietorship)
2. Ownership (Individual, Trust, Multiple Parties)
3. Documented governance (Who’s in charge)
4. Undocumented governance (Who thinks they’re in charge)

These preliminary questions are important because entity structure affects taxes, liability, estate planning, and succession planning. The wrong structure can quietly cost you tens of thousands of dollars a year.

I then ask about current business succession planning; the proverbial, “What happens if something happens?” This something includes (among others) disability, incapacity, retirement, and (unfortunately) death.  If the business depends solely on one person and there’s no plan, the family may inherit a mess instead of an asset.

My personal advice is that a business can be a powerful wealth-building tool or a planning disaster if it’s ignored. In analyzing the business, I try to focus on the following:

1. Where taxes might show up
2. Where risk lives
3. Where planning opportunities are hidden

More often than not, this is the point in a meeting where a client says, “I didn’t realize that mattered.”

Tax Planning: “What Are You Paying & Why?”

Once I get to the tax planning piece, people often say, “I have a CPA, and they handle that.”  And that’s a great start. I like CPAs, and I work with them often. Having a team of good advisors is key because tax planning is proactive and comprehensive, not simply compliance-driven.

I’ll ask questions about how you make your income:

1. W-2?
2. Business Income?
3. Investments?
4. Real Estate?
5. A mix?

This is important because income is taxed differently.  Efficient tax planning involves legally shifting, timing, or characterizing income to reduce annual tax exposure; not just reporting income accurately on a return.

I’ll also be interested in what you own, be it real estate, investment accounts, retirement plans, life insurance, business interests, you name it.  These all become relevant for tax planning because taxes aren’t just important when you earn money, it’s also important when you sell, gift, inherit, or (again, unfortunately) die.

Good tax planning also gets at what’s keeping you up at night. It could be paying too much tax, leaving a mess for heirs, losing control, the IRS, or a business partner. An appropriate tax plan isn’t always the most technically efficient; it’s also whatever helps you sleep at night. Remember, for tax planning, we focus on what’s next, not what’s already happened. The earlier the conversation, the more options you usually have.

The Final Question: “What Does Success Look Like For You, and How Do We Get There With Minimal Tax, Risk, and Regret?”

This answer really requires honesty, context, and sometimes confronting what you’ve been avoiding.  That’s where I come in to guide you, by turning big questions into clear answers with a plan that works. If you’re thinking about answers and want guidance, let’s talk.

For more information or to seek counsel from our Taxation group, please reach out to request a consultation or call us at 216-696-1422.

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This information is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

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Start Early, Revisit Often

Succession planning should start long before retirement. Early action enables leadership development, knowledge transfer, and resilient agreements that withstand foreseen and unforeseen events. Regular reviews keep plans aligned with evolving goals, family dynamics, and legal landscapes.

Consider Personal Planning

Business owners can benefit from transferring shares during their lifetime through annual exclusion gifts or the estate and gift tax exemption. Employing valuation discounts for lack of control and/or marketability can further reduce the taxable value of transferred interests.

Integrate Tax and Estate Planning

There are many tax and estate planning tools that will maximize the tax efficiency of transitioning a closely held business, including grantor-retained annuity trusts, spousal lifetime access trusts, intentionally defective gift trusts, and family limited partnerships, to name a few.

Additionally, incorporating a revocable living trust and an irrevocable life insurance trust in the estate plan helps avoid probate, protect assets, and provide liquidity for estate taxes, keeping the business solvent during transition.

Develop Key Talent

Successors may be family members, internal leaders, or external candidates. Incentive plans like deferred compensation agreements, employee stock options, buy-sell agreements, and gifting strategies can help retain key talent, reduce tax burdens, and promote smooth transitions.

Communicate the Plan

Open dialogue with all parties builds trust, while silence can lead to conflict. Though families may resist transparency, having difficult conversations helps avoid conflict and misunderstanding while building trust and ensuring alignment.

Whether you realize it or not, a succession plan exists. If not legally formalized, default statutes will control, often with undesired results. Planning is essential for a successful transition.

For more information or to seek counsel from our Trusts & Estates group, please reach out to request a consultation or call us at 216-696-1422. 

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*This article was originally authored for publication in Crain’s Cleveland Business. To view this article on the Crain’s Cleveland Business website, follow this link.

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Why You (Yes, You) Need an Estate Plan

If you’re over 18 and own anything (a house, a car, a dog, a collection of rocks stashed at your parents’ house), you need some kind of estate plan. Even if you’re not an eccentric billionaire with a secret wine cellar and a yacht named after your college roommate, your loved ones – and your belongings – deserve a plan. Without a will, state law will govern the disposition of your assets. And obvious cynicism aside: your state government might not be great at guessing your intentions.

What’s the best way to combat the inevitable? Planning. Implementing an Estate Plan, which can be changed and updated as often as needed, is a safeguard against the unpredictable.

What’s Actually in an Estate Plan?

A proper estate plan may include the following:

• A Will – The most common instrument
• A Revocable Trust Agreement – My personal favorite and designed primarily to avoid probate and keep your private things, well, private
• A Durable Power of Attorney – To handle financial affairs when you are unable; who pays your bills if you’re in a coma?
• Healthcare Directives/Healthcare Power of Attorney – Who is responsible for making medical decisions on your behalf
• Guardianship Designations – For your kids or a spoiled Pomeranian

But Wait, Let’s Talk Tax!

I wouldn’t be living up to my reputation as a tax attorney if I didn’t somehow bring everything back to tax.  A solid estate plan can help you:

• Use lifetime gifting strategies – Give now, avoid tax later
• Set up irrevocable trusts – Protect assets and reduce taxable estate
• Consider charitable giving vehicles – Do good and lower your tax bill (a win-win!)
• Take advantage of spousal portability – Romantic and tax-efficient

Remember, the IRS is not known for its flexibility or “do-overs.”

“I’m Good, I’ll Just Write Something Down…”

Sure, handwritten notes on a napkin might make for great courtroom drama, but in real life, a Do-It-Yourself Will is often a recipe for disaster (and family feuds, probate delays, and possibly a contract for your next box office hit).

Wills need to follow your state’s specific requirements for drafting, signature, validity, and contents. One misstep and your entire plan could change or be ignored after your death.

How to Get Your Estate Planning Started

Estate planning doesn’t have to be overwhelming. At its core, it’s about protecting the people and things you care about. Finally, a goal we can all agree on!

So, during National Make-A-Will Month, consider this your gentle nudge (or legal guilt trip) to:

• Get your documents in order.
• Talk to an estate planning attorney (hi!).
• Take control of your legacy.

Final Thoughts (Before You Update Your Will)

Recommending an estate plan isn’t novel: everyone knows they should do it, most people avoid it, and those who actually do it feel a lot better afterward. Trust me, even we, as legal professionals, can be guilty of putting off our own estate planning far longer than we should.

Together, let’s make this August the month you finally check “get a will” off your to-do list. Your future self and your loved ones will thank you.

Ready to get started? Reach out – our estate planning group will make it easier (and more fun) than you think.

For more information or to seek counsel from our Trusts & Estates group, please reach out to request a consultation or call us at 216-696-1422. 

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Start Succession Planning Early

Planning well in advance allows business owners to explore various tax-efficient strategies. Early planning helps mitigate potential tax liabilities and provides ample time to implement changes.

Utilize Family Gifting

Transferring ownership through gifting can be an effective way to reduce estate taxes. The IRS allows annual tax-free gifts up to a certain limit per recipient, which can be used to gradually transfer ownership to family members.

Establish a Trust

Trusts, like Grantor Retained Annuity Trusts and Intentionally Defective Grantor Trusts, can be utilized to transfer business assets during life while minimizing gift/estate taxes. These trusts allow appreciating assets to pass to beneficiaries with reduced tax consequences.

Employee Stock Ownership Plan

An employee stock ownership plan (ESOP) allows business owners to sell their shares to employees, providing tax benefits such as deferral of capital gains tax and no entity-level tax. ESOPs can also enhance employee motivation and retention, ensuring the company’s legacy continues.

Plan for Capital Gains Tax

When selling a business, understanding the capital gains tax is crucial. Structuring the sale as an installment sale can spread the tax burden over several years, potentially lowering the overall tax rate.

Engage Professional Advisers

Consulting with a team of tax advisers, estate planners and legal professionals ensures that business owners are aware of the latest tax laws. This helps to tailor advice and maximize tax efficiency.

Effective business succession planning requires a proactive approach to managing tax implications. By utilizing these strategies, business owners can ensure a seamless transition while preserving the financial health of their enterprise.

For more information or to seek counsel from our Taxation group, please reach out to request a consultation or call us at 216-696-1422.

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In celebration of National Small Business Month, we proudly recognize the contributions of small businesses in our community. McCarthy Lebit is committed to supporting entrepreneurs and business owners with trusted legal guidance through every stage of their journey, from formation to growth and beyond. As a law firm deeply connected to the small business community, we’re proud to serve as trusted advisors and advocates for business owners throughout the region.

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Qualified Small Business Stock

The allure of IRC Section 1202 is that, when all of the requirements are met, 100% of the gain recognized on the sale or exchange of Qualified Small Business Stock (QSBS) is excluded from income. I know what you’re thinking, no tax on the sale of stock, sign me up!

As federal income tax isn’t always that straightforward (which ensures I remain employed), the requirements for the exclusion from income are somewhat stringent.

Let’s start with the basic idea that the sale of stock is generally the sale of a capital asset subject to capital gain tax rates.  With regular talks on capital gains tax rates increasing, avoiding any tax is always a plus.

In this analysis, we only care about the sale of QSBS. Therefore, it’s important to distinguish QSBS from all those other kinds of stock.

Three Key Qualified Small Business Stock Requirements

QSBS is stock that meets three (3) requirements:

1. Small Business;
2. Original Issuance;
3. And Active Trade or Business.

The C Corporation Factor

The “small business” requirement is where I’ll lose a good chunk of you. The reason is that QSBS stock must be issued by a C Corporation, a legal entity that is separate from its owners, with cash and other assets totaling $50,000,000 or less immediately after the stock is issued.

It’s not often the dollar amount that gets people; it’s the fact that people do not like to hold an interest in a C Corporation.  You may have heard of the dreaded “double tax” in a C Corporation and that a “pass-through” entity is often more appealing to business owners.  However, for the right investor (one likely targeting a realization event as opposed to a stream of income) the C Corporation has a unique appeal.  Further, with the 2017 reduction in the corporate income tax rate from 35% to 21%, there has been some resurgence in the elusive C Corporation.

Original Issuance Requirement

The “original issuance” requirement is another hurdle. The owner of the QSBS must acquire the stock as an original issue in exchange for money/property or as compensation. Therefore, the purchase of an existing shareholder’s shares will not satisfy the original issuance requirement. The key here is planning at the outset of a new venture.  There are limited exceptions to the original issuance requirement, however, a transferee can preserve QSBS status if the transferee acquired the stock by gift, at death, or in a qualifying partnership distribution.

Active Trade or Business Requirement

If you’ve made it this far, the “active trade or business” requirement is, arguably, less stringent. Under the active business requirement, at least 80% of the corporation’s assets must be used in a “qualified” trade or business during the shareholder’s holding period.

A qualified trade or business has certain exclusions, namely:

• Services in the fields of health, law, engineering, architecture, accounting, etc.;
• Banking, insurance, finance, leasing, investing, or similar;
• Farming;
• The production/extraction of certain products subject to depletion;
• Hotel, motel, restaurant, or similar.

The exclusions from a qualified trade or business often become a fact analysis on a case-by-case basis.

Five-Year Holding Period: Patience Pays Off

Assuming the above requirements are met, congratulations – you have QSBS. To reap the benefits of income exclusion under Section 1202, you must hold that QSBS for at least five (5) years before it is sold. The five-year holding period starts from the date the stock is issued to the shareholder. If the QSBS is sold before the five-year holding period, only a portion, if any, of the gain will be excluded.

Now that you’ve got QSBS after holding it for five years, what happens now? The benefits from Section 1202 are only realized when the shareholder eventually sells the QSBS (i.e., sorry, not asset sales!). This matters because, typically, buyers prefer to purchase assets.

Understanding the Section 1202 Exclusion Limits

Too good to be true? The IRS thought so, too. The Section 1202 exclusion is limited to the greater of: (i) $10,000,000 and (ii) ten times the aggregate basis of stock sold. While basis can be a confusing concept for some, the following example should shed some light on this limitation. 

Assume that in 2015 you purchased QSBS for $3,000,000. In 2020, you sell the stock for $15,000,000, realizing a gain of $12,000,000 (i.e., $15M – $3M). The maximum excluded gain is $30,000,000 (the greater of $10M and ten times a basis of $3M). As a result, the entire $12,000,000 gain would be excluded (not a bad day!).

Is Qualified Small Business Stock Right for You? Key Takeaways

As in all good tax planning, if the narrative fits, the opportunities can be worthwhile. The key is to know what you’re looking for. So, if you find yourself considering investing in a particular C Corporation, at original issuance, that’s engaged in an active trade or business for five years, don’t forget about good ol’ Section 1202.

For more information or to seek counsel from our Taxation group, please reach out to request a consultation or call us at 216-696-1422.

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Estate planning is especially important for business owners because it addresses both personal and business assets.  Failing to plan can result in legal obstacles and financial risks for your heirs and business partners.

Proper estate planning protects your business, ensures that your wishes are honored in the event of incapacitation or death, and minimizes tax liabilities.

When addressing your estate plan, consider the following essential elements.

Wills & Trusts

Individuals can utilize both wills and various types of trusts, such as revocable trusts, in transferring business assets. Without a proper estate plan, the probate process can take several months, during which time your business could suffer. A revocable trust allows you to bypass the probate process, ensuring that your business continues to operate without delay. Holding your business interest in a trust helps your heirs avoid likely administrative bottlenecks.

Power of Attorney & Healthcare Directives

A durable financial power of attorney and an advance healthcare directive ensures that a trusted individual will manage your business and personal affairs if you become incapacitated. These documents should be prepared in compliance with Ohio law to ensure enforceability.

Business Succession Plan

Ohio law allows for the seamless transfer of business interests through a well-designed and implemented succession plan. A succession plan specifies who, whether a family member, business partner, or key employee, will take over the business. Without a succession plan, probate courts may step in to determine ownership, which can be both costly and time-consuming. Succession planning ensures business continuity and minimizes the risk of disputes.

Tax Considerations

While Ohio does not impose an estate or inheritance tax, federal estate taxes may apply to estates over the federal exemption limit. Gifting business interests before death or implementing charitable remainder trusts are strategies that may reduce taxable estate size and help preserve wealth. Business owners can ensure their estate plan minimizes federal tax liabilities by working with experienced legal and tax professionals.

As a business owner, taking the time to create or review your estate plan is a critical step to secure your family’s future and to safeguard your business interests. Rest easy during the holiday season by planning early.

To seek counsel from our Trusts & Estates group, please reach out to request a consultation or call us at 216-696-1422.

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Year-round tax planning allows you to not only react to tax deadlines but to actively manage your financial affairs in a way that maximizes tax efficiency. Below are some key benefits of adopting a proactive approach to your taxes throughout the year.

Prevent Surprises

High-income individuals often experience fluctuations in income due to bonuses, stock sales, rental property income, or capital gains from investments. Without careful planning, these variations can lead to unexpected tax bills, penalties, or underpayment of taxes.

We are subject to a progressive income tax system, and high earners may find themselves in the top tax brackets.  Year-round tax planning assures that you’re withholding the correct amount of state and federal taxes based on your evolving income throughout the year. Regularly reviewing your financial situation with a tax professional can help you avoid underpayment penalties and spread tax obligations more evenly.

Maximize Available Deductions and Credits

A primary advantage of year-round tax planning is the ability to maximize available deductions and credits. Taxpayers who wait until the end of the year may miss out on valuable opportunities to reduce their taxable income. Through proactive planning, you can take full advantage of deductions related to charitable giving, healthcare costs, mortgage interest, and retirement contributions.

For example, Ohio taxpayers can benefit from the Ohio CollegeAdvantage 529 savings plan, which offers a deduction of up to $4,000 per beneficiary per year (with unlimited carryforward). Consistently contributing to this plan year-round, instead of making a lump-sum payment at the end of the year, helps you maximize this deduction while also growing tax-free savings for educational expenses. Similarly, reviewing your charitable contributions early on allows you to strategize how much you can give to maximize your tax benefits while supporting causes important to you.

Plan for Retirement

Tax planning and retirement planning are deeply intertwined. High-income earners can benefit from year-round tax planning to maximize contributions to tax-advantaged retirement accounts such as IRAs, 401(k)s, and Roth IRAs. While these accounts provide valuable tax-deferred or tax-free growth, the key to maximizing their benefits lies in making regular contributions throughout the year, rather than waiting until year-end.

Contributing to traditional retirement accounts can reduce your taxable income today, which is especially valuable for those in higher tax brackets. Alternatively, if you anticipate being in a lower tax bracket during retirement, converting some of your traditional IRA assets into a Roth IRA may be an advantageous strategy. A Roth IRA allows for tax-free growth and withdrawals, but this conversion needs to be planned to avoid triggering a large tax bill all at once.

Estate Planning Strategies

For those looking to preserve wealth for future generations, year-round tax planning is critical for effective estate and gifting strategies. Although Ohio does not have an estate tax, federal estate taxes may apply to larger estates. Proactive tax planning throughout the year allows you to take advantage of the annual gift tax exclusion ($18,000.00 in 2024) and reduce the size of your taxable estate while providing financial support to loved ones.

In addition, establishing trusts or family-limited partnerships can help you protect your assets and minimize future tax burdens. These strategies require careful planning and ongoing adjustments to remain in compliance with tax laws and the preservation of your wealth.

Align Goals with Taxes

Lastly, year-round tax planning helps align your overall financial strategy with your tax goals. Whether you’re focused on building wealth, saving for retirement, or funding a business venture, a proactive tax plan helps you identify opportunities for tax savings that support your broader financial aspirations. For high-income earners, these strategies are essential in maintaining financial growth while minimizing the tax burden.

Tax planning is not just a once-a-year exercise; it’s a year-round process that offers significant benefits for high-income earners. By staying ahead of tax obligations and working with financial professionals who understand the ever-changing tax laws, you can maximize deductions, avoid penalties, and ensure your financial goals are met in the most tax-efficient way possible. Proactive planning is key to keeping more of what you earn and building a secure financial future.

To seek counsel from our Taxation group, please reach out to request a consultation or call us at 216-696-1422.

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