Tax season is all about awareness. There are many components to taxes, and unless you understand all the moving parts, you run the risk of taxes beginning to eat up your asset base. Understanding what kind of income is taxed, what isn’t, and what has the potential to push you into a higher tax bracket is a crucial part to your financial planning.

Tax Season is a puzzle.

There are many aspects to consider. First, you’ll have income tax. Several different income streams can be taxed like this, including your RMDs and other withdrawals from retirement accounts.

Income tax, and many others, are taxed at a marginal rate. You want to make yourself aware of what could push you into the next bracket. For example, dividend income in the lowest bracket is taxed at a rate of 0%, with the next bracket being 15%. Knowing at what point your dividend income will be taxed at 15% and keeping it below that limit could save you a lot on your taxes.

Social Security is another source of income which may or may not be taxed depending on how much you make. This, like income taxes, is based on the combined income of you and your spouse. If combined income plus Social Security is less than $30,000, you will not be taxed.

Even elements that are not directly taxed could affect how much you’re paying. Consider municipal bonds, which you do not typically have to pay taxes on. While you are not directly paying tax on that interest, the income you get from them could be used in a calculation to determine your overall income tax.

Plan.

Taxes are complicated. The most important thing is to be aware. Awareness of all possible taxes, and the ways in which they interact, is the best way to make sure you’re creating a full picture financial plan that will help minimize the tax load. While it may be hard to analyze the whole financial picture, it may be helpful to sit down and tackle it with a trusted financial advisor or tax specialist. After All, you deserve to save on your taxes.