Tax planning is a critical part of financial management. It can be significant for individuals in specific professions, such as behavioural therapists and marketing agencies, as well as high-net-worth individuals.
By utilizing the 3 “D’s” of tax planning – Deduct, Defer, and Divert – individuals and businesses can take proactive steps to minimize their tax liability and maximize their financial resources legally.
In this blog post, with examples, we will explore how the 3 “D’s” can be explicitly applied to behavioural therapists, marketing agencies, and high-net-worth individuals.

1. Behavioural Therapists

Deduct: Behavioural therapists can take advantage of various tax deductions, such as office expenses, travel expenses, and continuing education. For example, a behavioural therapist could deduct the cost of their office rent, utilities, supplies, and any travel expenses incurred while seeing clients. They could also deduct the cost of attending conferences or workshops related to their field of work.
Defer: Behavioral therapists can defer income by contributing to a retirement plan, such as a SEP IRA or a Solo 401(k). By contributing to these plans, therapists can reduce their taxable income for the year and pay taxes at a lower rate in retirement.
Divert: Behavioural therapists can divert income by investing in tax-advantaged accounts such as an HSA or a 529 college savings plan. By contributing to these accounts, they can benefit from tax-free growth and potentially reduce their tax liability.
Example: A behavioural therapist earns $100,000 in a year. They deduct $15,000 in expenses, contribute $10,000 to a Solo 401(k), and divert $5,000 to an HSA. Their taxable income for the year is reduced to $70,000, resulting in significant tax savings.

2.  Marketing Agencies


Deduct: Marketing agencies can take advantage of various tax deductions, such as office expenses, advertising expenses, and employee salaries. For example, a marketing agency could deduct the cost of their office rent, utilities, supplies, advertising campaigns, and employee salaries.
Defer: Marketing agencies can defer income by utilizing an accounting method called “accrual accounting.” Accrual accounting allows businesses to recognize revenue when earned rather than when received, which can help to defer income to future years.
Divert: Marketing agencies can divert income by investing in tax-advantaged accounts such as a SEP IRA or a Simple IRA. By contributing to these plans, they can benefit from tax-free growth and potentially reduce their tax liability.
Example: A marketing agency earns $500,000 in a year. They deduct $100,000 in expenses, utilize accrual accounting to defer $50,000 of income to the following year, and divert $25,000 to a SEP IRA. Their taxable income for the year is reduced to $325,000, resulting in significant tax savings.

3.  High Net-Worth Individuals


Deduct: Tax deductions for high net worth persons include those for charitable contributions, mortgage interest, and property taxes. For instance, a wealthy person might write off the cost of their kind donations, mortgage interest, and real estate taxes.
Defer: High-net-worth individuals have access to a variety of methods for deferring income, including participating in retirement plans and deferred compensation plans.
Divert: Rich people can reroute their income by putting money into tax-advantaged accounts like a Roth IRA or a Health Savings Account. By making contributions to these accounts, they can take advantage of tax-free growth and perhaps lower their tax obligations.

We hope this helps you in understanding the “3 D’s”! Get in touch with us if you’d like to learn more about how you can save on your taxes using these methods.