Episode 91: How Can I Reduce My Tax Bill?
Today’s question is all about taxes. People want to know how they can reduce their tax bill.
Maximize Your Tax Deductions
The most common way to reduce your tax bill is just by being able to maximize the deductions that you’re taking. Whether you’re single, married filing separately, or married filing joint taxes, all of us are eligible to take what is known as the standard deduction.
The IRS did us all a big favor. They reduced our ability to itemize taxes and they just took the standard deduction and doubled it, making it a lot easier and saving everyone a lot of time when it comes to actually filing taxes.
Tax-Deferred Retirement Accounts
Other ways you can get deductions are by making contributions into tax deferred retirement accounts, like 401(k)s, 403(b)s, IRAs, or SEP-IRAs. If you have 1099 income or if you have self-employment income, you can actually defer up to $62,000 in taxes. IRA contributions can be as
high as $7,000 a year, and 401(k) contributions can be as high as $27,000 a year. These are massive deductions that people can be taking as a way to lower their taxable income. When working with clients, we’re hyper aware of the importance of preserving these funds and strategizing how to draw from them as income when retired. You’ll need this money to live off of and ensure financial security.
Charitable Giving & Taxes
People always ask, “how do I pay zero taxes on my retirement money?” The only way to do this is to gift it. You can gift up to $100,000 per year from a retirement account directly to a charity and pay zero taxes on that money. If you’ve done a good job saving and want to give back, the IRS allows you to donate from your 401(k) or IRA without incurring any taxes. So if you don’t need the money and you certainly don’t want the tax burden that it will result in, you can give it to charity and truly pay zero taxes on it.
Avoid surprises at tax time – take a look at the changes that could affect your return. Get your FREE guide.
