Tax Planning

# CFP — Tax Planning Exam: CFP Board Certification Exam — Domain E: Tax Planning (14% of exam) Exam Format: 170 questions total | Two 3-hour sessions | [Source: CFP Board, cfp.net, live-fetched 2026-06-29] Last Updated: June 2026 --- ## Fundamentals of Tax Planning ### Four Basic Tax Planning Strategies 1. Deductions — Reduce income subject to tax 2. Credits — Reduce taxes owed dollar-for-dollar 3. Deferrals — Delay recognition of income to future periods 4. Shifting — Move income to lower-bracket family members or entities ### Time Value of Tax Deferral Deferring $10,000 of income for 10 years (assuming 25% tax rate, 7% return): - Pay now: $2,500 tax; $7,500 invested for 10 years at 7% = $14,754 - Defer 10 years: $7,500 + $2,500 invested (before-tax) for 10 years at 7% = $19,672; tax paid at end ≈ same rate Value of deferral depends on: length of deferral, investment return, and rate change expectations. --- ## Individual Income Tax Essentials ### Rate Structure 2025 Rates (approximate, MFJ): | Taxable Income | Rate | |---|---| | $0 – $23,200 | 10% | | $23,200 – $94,300 | 12% | | $94,300 – $201,050 | 22% | | $201,050 – $383,900 | 24% | | $383,900 – $487,450 | 32% | | $487,450 – $731,200 | 35% | | Over $731,200 | 37% | Marginal rate: Rate on the next dollar of income — used for tax planning decisions. Effective rate: Average rate on all income (total tax / total…