The Importance of State Tax Planning

When most people think about taxes, they tend to focus solely on federal tax obligations. But federal taxes are only part of the equation—state taxes are equally important. In some cases, your state tax liability may even exceed your federal tax owed.

Our goal is to use our multi-state expertise to help minimize your total tax burden. For instance, if your investment portfolio includes foreign taxes paid, we may be able to deduct some or all of those taxes on your state return, depending on where you live. Certain states—such as North Carolina and Indiana—allow these deductions, and we research your specific situation to take full advantage of such opportunities.

Additionally, we ask targeted questions about your investment and financial activities throughout the year to identify potential state-level deductions. A great example is 529 plan contributions: these may not be deductible on your federal return, but they could be deductible at the state level depending on your state’s tax laws.

Clients often receive brokerage statements from their financial institutions. We go beyond basic data entry—our team reviews these documents to identify tax-exempt interest that may be excluded from your state return or U.S. bond interest that is exempt from state income tax.

For business owners and investors receiving K-1s, our focus shifts to accurately reporting state-sourced income, applying state-specific modifications, and identifying any available state business tax credits. We aim to ensure you're compliant in every state you’re required to file in—while maximizing tax efficiency wherever possible.