The Australia-based manager defeated Jim Begg by 62 points to 53 on Sunday.
Both finalists had seven of the same starting XI.
They each earned 12 points from captain Mohamed Salah (£12.9m), while Riyad Mahrez (£8.1m) and Son Heung-min (£9.6m) also supplied an assist apiece from midfield.
Trent Alexander-Arnold (£7.8m) and Patrick Bamford (£6.6m) produced a clean sheet and goal respectively, while Timothy Castagne (£5.8m) and Michail Antonio (£6.7m) both blanked.
Ultimately, it was Taylor's decision to invest heavily in midfield that led him to glory.
He had the funds to have Sadio Mane (£11.8m) in a 3-5-2 formation for Liverpool’s match with Crystal Palace, whereas Jim relied on left-back Andrew Robertson (£7.3m) as part of his own Reds’ triple-up in a 3-4-3 set-up.
Mane’s two goals, added to a clean sheet from West Ham United’s Aaron Cresswell (£5.7m), earned James 22 points that proved crucial.
That essentially was the difference between the two sides, with Robertson and Leeds United winger Jack Harrison (£5.6m) combining for 13 points from his beaten opponent.
Taylor’s victory made it a final-day double for Liverpool fans, with his fellow Reds supporter Michael Coone also crowned winner of 2020/21 FPL.
A total of 62 points also helped Taylor to 49th place overall, his highest-ever finish.
Begg, meanwhile, claimed 71,726th place, following six successive finishes inside the top 35,000.
Taylor was already enjoying his best season by the time the FPL Cup started in Gameweek 17, sitting just inside the top 35,000.
And as the campaign unfolded, he continued his rise up the overall rankings. Seventeen green arrows in 22 Gameweeks pushed him into the top 50.
But it wasn’t all smooth sailing for the cup winner.
He rode his luck at times, twice overcoming opponents when he scored just 37 points, as well as claiming two one-point victories.
In total, Taylor defeated 22 opponents on his way to FPL Cup glory.
- VIP hospitality at one 2021/22 Premier League match
- Includes travel and two nights’ accommodation
- Copy of EA SPORTS FIFA 21 and a games console
- Tablet computer
- Bluetooth speaker
- Nike manager jacket
- FPL goody bag consisting of a rucksack, t-shirt, mug, water bottle, stress ball, pen, pad and key ring