The Psychology of Taxes: Why Emotions Matter More Than You Think

When you think of taxes, what comes to mind? Deadlines. Deductions. Spreadsheets. Stress.

But there’s another layer most advisors and clients overlook: the psychology of taxes.

I recently joined The Mind Money Spectrum Podcast to talk about this very topic—where psychology and taxes intersect, and how understanding behavioral dynamics can actually improve your clients' financial decisions (and your planning process).

Taxes Are Emotional, Not Just Mathematical

We like to believe tax decisions are purely logical. Max out this account. Defer that income. Harvest these losses.

But in reality, taxes are deeply emotional.

They trigger fear ("What if I owe more than I thought?")

They trigger guilt ("I should have planned better.")

They even trigger resentment ("Why is the government taking so much of my money?")

As advisors, when we only focus on the numbers, we miss what’s really driving behavior. And that’s where things start to unravel—when clients avoid tax prep, delay filing, or reject a smart strategy because it feels wrong.

Common Psychological Roadblocks Around Taxes

In the episode, we discussed several ways emotional biases show up during tax season, including:

• Avoidance: Clients who drag their feet on filing or freeze up when tax conversations start

• Loss aversion: The pain of paying taxes feels disproportionately greater than the benefits of a refund or tax-efficient strategy

• Present bias: Choosing smaller tax wins today rather than larger benefits down the road

• Confirmation bias: Believing misinformation about taxes because it aligns with a fear or frustration

These aren’t just quirks. They’re predictable psychological patterns that can derail even the best-laid plans—unless we learn to work with them.

Reframing the Conversation Around Taxes

Here’s what I encourage advisors to do:

• Validate the emotion. "It makes sense this feels overwhelming. There are a lot of moving parts."

• Shift from judgment to curiosity. "Tell me more about what you were feeling when you decided to hold off on that estimated payment."

• Use behavioral framing. "Would you rather save $500 in taxes this year, or invest it and potentially grow it for the next 10?"

When we open the door to emotion in tax planning conversations, we not only reduce client resistance—we build trust.

Why This Matters for Advisory Firms

Helping your clients navigate taxes is more than compliance or strategy. It’s about supporting them through one of the most emotionally loaded parts of their financial life.

When you understand the behavioral dynamics behind their decisions, you:

• Give better advice that aligns with their values and capacity

• Increase implementation rates and follow-through

• Create more human-centered, responsive financial planning experiences

This is especially important during transitions—starting a business, selling a property, navigating a windfall or divorce—where taxes are not only higher-stakes but also more emotionally charged.

Final Thoughts: Beyond the Tax Return

Taxes aren’t just a numbers game. They’re a reflection of people’s stories, fears, beliefs, and identities.

As a therapist-turned-behavioral-finance-specialist, I believe that when we bring emotional intelligence into the tax conversation, we unlock better outcomes for both clients and advisors.

If you want to hear the full conversation and get even more insights, listen to my appearance on The Mind Money Spectrum Podcast here.