Income Tax planning is the analysis of a financial situation, or plan, from a tax perspective. The purpose of tax planning is to ensure tax efficiency. Through tax planning, all elements of the financial plan work together in the most tax-efficient manner possible. Tax planning is an essential part of a financial plan. Reduction of tax liability and maximizing the ability to contribute to retirement plans are crucial for success. Tax planning covers several different considerations. Considerations include timing of income, size, and timing of purchases and planning for other expenditures. Also, the selection of investments and types of retirement plans must complement the tax filing status and deductions to create the best possible outcome.