Step 1 of Saving Taxes Your Way: Measure
Before any tax strategy works, you have to know where you stand and where you’re trying to end up.
Most business owners skip this. They file every year, take whatever their accountant finds, and call it a strategy. A tax return looks backward at what already happened. A tax strategy looks at where you are, how you spend, where you’re going, and what the gap looks like. Then it cuts what you owe before it leaves your account.
Get the Foundation Right First
Strategy only works once the foundation’s solid. If your books aren’t reconciled, your transactions aren’t classified, or your last few returns aren’t current, fix that first. Just getting your taxes truly right will save most business owners more than any strategy will. Once that’s done, you’re ready for this.
What Measuring Means
Measuring means building two personal financial statements for today, plus a target version of those same statements for the future you want. A statement of net worth and a personal P&L. Together they answer two questions for both points in time. Where are you, and how do you behave with money? Without that picture, any strategy’s a guess.
Think about planning a trip. You want to get to Hawaii. But if I don’t know whether you’re in Missouri or Miami, whether you want first class or a road trip to California and a flight from there, I can’t map the route. Tell me where you are and how you travel, and the path gets obvious fast.
The Statement of Net Worth
Also called a personal balance sheet. It lists what you own (assets), what you owe (liabilities), and the difference, which is what’s actually yours.
Assets split into current and long-term. Current includes cash, brokerage, retirement, and your basis in any business interest or stock. Long-term covers real estate, land, and automobiles. Liabilities split the same way. Current covers credit card debt, tax debt, and the current portion of long-term obligations. Long-term covers mortgages, student loans, and notes payable.
Build it on cost basis. If you have big unrealized gains, track those separately, but start with what you paid.
The statement of net worth tells me what you’re capable of and where you’re already building. Investment style, liquidity, how your wealth has grown, where you’re concentrated. If your business equity climbs fast, that points toward business tax planning. If real estate goes up $100K year over year, I know that’s where you’re building. It’s the map of your assets and your investing preferences.
The Personal P&L
This is your personal income and spending, not your business’s.
For income, I want the net from every source. Business income, rentals, wages, dividends, interest, capital gains. Income falls into five types. Earned, ordinary, passive, investor, and inheritance. If you run an S-corp and take a $50K salary with $100K in profits, show both line items separately. And if you have rental income, I want the accounting profit, not the cash flow. If you net $30K in rental income but your mortgage payment is $35K, the income is still $30K. Profit and cash are different things.
For expenses, I want everything not being deducted somewhere else. Groceries, travel, dependents, medical, education, charity, personal auto. High charitable giving? There are strategies for that. Heavy travel? Same. Heavy dependent care? Same. The P&L shows your habits and flags where there’s room.
This is also where I look for the one-degree shift. The best plastic surgeons can take twenty years off your face with a quarter-millimeter change. That’s the goal here. Not a financial overhaul, just a small redirect of what’s already flowing through your spending. One degree, held consistently, compounds into something real.
The Ideal Set
Once you have your current statements, build a second pair for the future you want. What does your net worth need to look like? How much income, in what mix? What’s the spending look like? What’s left over each year?
Most people skip this part because the future feels fuzzy. But if you can’t put numbers on the destination, you can’t measure the gap. And the gap is the whole point. That’s the problem your tax strategy is solving.
The ideal set doesn’t have to be precise to the dollar. Ranges are fine. But it has to be specific enough that you can see distance between today and tomorrow.
How Hard Is This to Build?
Easier than you think, especially now.
The statement of net worth is mostly a snapshot. Open your bank, brokerage, retirement, and business balance sheet. Pull your real estate statements, mortgage balance, and credit card balances. Write down the numbers. If your accounting’s already done (and it should be before we’re having this conversation), most of this is sitting in your books.
The P&L is even easier if your personal spending runs through one checking account and one credit card. Give twelve months of statements to an AI tool and ask it to categorize everything. You can have a working personal P&L in fifteen minutes.
The ideal pair takes an hour with a coffee and an honest conversation with yourself.
Under a couple million in assets, you can do this yourself. Over five to ten million, bring an accountant in. At that scale you may be paying seven figures in taxes and the complexity warrants it. For most people reading this, it’s doable right now with the tools you already have. I’m also building a workpaper to make it even simpler.
What You Do With the Picture
Once you have both sets of numbers, two things happen, in either order.
You analyze the current set. Look at your resources, your liquidity, your spending habits, your investment patterns. Get clear on how you actually operate.
And you study the gap. Today’s net worth versus the target. Today’s income and spending versus the target. Where does it need to grow? Where does it need to shift?
The gap is the strategy problem. From there, you look at what’s available and filter for three things. What’s optimal (highest ROI), what’s convenient (fits how you already operate), and what you’ll actually stick to. That intersection is your strategy.
The Cost of Skipping This
You can still optimize without measuring. Business tax strategies don’t require a personal balance sheet. You can still make moves.
But if you want a complete strategy built around your numbers and your goals, skipping this means flying blind. You might pick strategies that don’t fit, or ones you won’t stick to, or miss the ones that actually move your needle.
The real cost is time. Every year without a real strategy is a year you’re working harder than you need to for the same profit. A working strategy might get you to your goals in three years. Without it, five. Those two years don’t come back.
Worst case, you build the picture, look at what’s available, and find there’s nothing left to optimize. You move on. No harm done. Best case, you cut your tax bill significantly and reach your goals years ahead of schedule.
What you measure, you can move.
Stay smart, Jonathan Sussman CPA
