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don't let the tax tail wag the dog

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The four "maxims" of tax planning are relatively straightforward, and don't need rehashing here. The text also mentions considering "nontax" factors, which is often times a very important and very overlooked aspect of the decision making process.

There is a saying common among CPAs that goes "don't let the tax tail wag the dog..." What does that mean?

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Don't let the tax tail wag the dog

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Don't let the tax tail wag the dog:

Let us first know what exactly it means from an external source:

Don't make an economic decision based purely and entirely on the tax issues involved. Sometimes it might work out for you, but in many cases you'll be very disappointed. Remember that taxes are still a percentage game. That means that, in the 27% bracket, a tax deduction of $100 will only save you $27 in taxes. What happened to the other $73? Gone forever. So when somebody throws money away and glibly claims, "It's OK, it's a write-off," remember that there might be tax benefits, but some real, live cash flew out of this ...

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Sheetal Jain, PGDM
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  • Post Graduate Diploma in Management (Equivalent to MBA), All India Management Association
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