Who wants to pay taxes anyway? The truth is that you're not alone! Every taxpayer I know wants to pay less taxes, and the rich are not the exception, in fact they are the most interested in finding out ways on cutting down their tax payments from grabbing a bite from their fortunes.
The best way to do this? Being proactive in effective strategies that work to minimize tax payments legally. This is something that literally anyone can do regardless of income, status, or net worth
As a tax attorney and advisor, I make sure to help and guide help people to stay on track of their expenses on a yearly basis so that not one deduction is missed from being claimed.
All the financial goals you want to attain such as investing, growing your net worth, financial freedom, and retiring with a solid retirement plan are all accomplished more easily by being tax efficient, aka saving money on taxes!
That is why tax planning is such an important part of the work I do for my clients. After all, it’s not what you make but what you keep.
Tax advisors, like myself, use the following methods to legally minimize the tax liabilities of high income earners who are strategic and efficient in the way the spend their money.
1. They are Self-Employed and Maximize Tax Deductions:
There is an immense tax saving value in being self-employed and/or owning your own business. What is most important about being your own boss is that you get more options to keep your hard earned money to yourself. This is basically done by having business expenses, tracking them all down and claiming them as deductions. How do you know what is a business expense, how to track it down, and whether you can deducted? This is when working with a tax attorney comes in handy. We're able to guide you to make the most strategic and beneficial decisions with your money and cut down your tax bill by making sure that every single tax-saving opportunity is found.
2. They Donate stocks to charity:
One of the most distinctive aspects of wealthy people is how much understanding they have on the value and importance of investing in the stock market, and a significant amount of their wealth is built and held in highly appreciated investments.
What is done with these investments is what marks the difference on how to be tax efficient, this is exactly how it works:
Once they donate stocks to a qualified charity, they receive a tax deduction for the full amount of the donated stock. This is a big win outcome because they get the benefit of not having to pay on all of the capital gains that would otherwise be taxed and due to be paid if they sold the stocks to donate the proceeds.
See what we did there? It's a tax strategy. A smart way to play with the system and make it work to your benefit.
3.They deduct their health insurance and include their spouses:
There are more than one way to increase this deduction. However, this strategy only works if you are self-employed. Self-employed individuals can write off their health insurance payments.
But that's not all. An effective tax strategy is to have your spouse working for your business and turning the expense of health insurance payments from a personal one to a business one. Basically, you're paying the health insurance plan of one of your employees.
This also allows the purchase of a better health plan, which although may include a higher premium payment, results in lower out of pocket costs for medical care, when you need it.
4. They Capitalize on Depreciation:
It's possible you're wondering what does this mean? What is depreciation and what does it meant o capitalize on it?
Let's start by defining what depreciation is.
Depreciation is basically the decrease of the monetary value of an asset due to use, wear and tear or obsolescence.
According to the Internal Revenue Service(IRS) "Most types of tangible property-except land-such as buildings, machinery, vehicles, furniture and equipment are depreciable. Likewise, certain intangible property, such as patents, copyrights and computer software is depreciable.”
The relation of depreciation with taxes is that depreciation is an income tax deduction that can be claimed by taxpayers to recover the cost of the lost value of their property or properties.
So, how do you capitalize on depreciation?
I will illustrate this with an example for you.
The New York Times recently published a story about how Trump’s son-in-law, Jared Kushner, cited depreciation of property in order to lower his taxes. It was reported that “The losses were driven by depreciation, a tax benefit that lets real estate investors deduct a portion of the cost of their buildings from their taxable income every year.” Regardless of whether or not you like Trump, and his family, they make a lot of money and they know how to not pay taxes on it. This is a legal and smart way to do it.
5.They Take Full Advantage of Retirement Accounts:
Retirement accounts are many times overlooked by those who are working hard on building their current wealth. It may seem like retirement is not a priority if you're trying to make it and gain financial independence in the present. However, it is a norm for high-income households to understand the importance of minimizing current taxation by using long term strategies such as maxing out tax advantaged retirement accounts. This is actually one of the easiest and most common strategies used to cut down the tax bills.
Roth and Traditional IRA accounts may be a good place to start. Check out my blog post on the difference between these two accounts, and learn which one may work best for your current situation to achieve your financial goal.
But, I have more! If you're self-employed or a business owner, there is one strategy that will likely provide you even higher savings on your tax payments.
For self-employed individuals and business owners the option of opening up a 401(k) Profit Sharing Plan is available. This allows these individuals to contribute up to $55,000 because they can contribute to their retirement plan as both: employee and employer. As an additional tip: you can also hire your spouse as an employee and the contribution amount of your household will increase even more!
This all minimizes your tax payments on a yearly basis, imagine all you can invest and grow with the money you're saving on tax payments. This is why long term strategies work so well to help you achieve your current financial goals.
Don’t let these five valuable strategies overwhelm you. Not all of the strategies listed I mentioned on this blog post will work for everyone nor will you necessarily need all of them to achieve all of your financial goals. As you gain more knowledge on how to handle your finance, and your income grows you will want to be aware of what tax-saving options you can use to lower your taxes over time. This is why it's important to seek a tax expert's advise and guidance to discuss your specific circumstances, and plan on how to achieve your financial goals in easily broken down steps.
Keep a licensed tax expert nearby to keep your taxes from eating up your income!
As a licensed Attorney I’m well-versed in the procedural and substantive tax rules and laws necessary to guide you and advise you on the most efficient tax strategies for you.
So don't wait any longer and start your process today: Book a legal consultation to discuss your case.