“You are worse than the Dentist.”
It’s tax time. According to some of my clients-one of the worst days of the year. Most of my clients are patriotic Americans, but they don’t want to pay more taxes than they have to. Over the years I have noticed most of my clients initially focus on deductions. Should I buy a house to reduce my taxes? What about my real estate taxes and charitable contributions. As your income goes up these deductions can be phased out or rendered useless by AMT tax. My focus is always on the front page of the tax return. I have a couple of strategies to help my clients minimize their taxes-without spending a fortune on the deduction side of things.
- Minimize your W2. Wait…What? I am not saying to minimize your earnings…just minimize the amount you are paying taxes on. Maximize all of your pretax deductions for retirement savings, medical, and childcare.
- Don’t pay taxes on money that you are not using. If you have investment income that is not being used and is just being reinvested- look at ways to reduce the amount you have to pay taxes on. This is accomplished by looking at tax-advantaged, tax-deferred, and tax-free investments.
- Maximize above the line deductions. If you are eligible for an IRA, retirement plan contribution, or an HSA-Do it. These deductions are not reduced by your AGI.
Of course, all of these suggestions depend on your individual circumstances and goals. With simple changes, you could potentially be saving on your taxes and putting yourself in a better position to achieve your goals. With proper tax planning, you might not need Novocain at your next tax appointment.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.