Tax Saving Strategies for High Income Earners
There has been a huge debate on whether or not high-income earners need to pay more in taxes. While this debate will never be resolved and may very well be passed down to our children, and children’s children, the only thing we can do is try to save as much tax dollars as possible while learning about ways you can reduce the amount of tax dollars owed.
This is especially an issue for high-income earners because those who are fortunate enough to save a great deal of money also have the responsibility of paying taxes on it as well. And since taxes are expected to increase for high-income earners, Success Tax Relief has composed a list of helpful tax saving strategies that will help taxpayers in the higher bracket save money.
- Freeze Your Money
Freeze your money?
Just like when you or your employer puts a percentage of your money away for social security, you don’t have to pay taxes on it because it’s not considered taxable income. Taxable income is money you actually receive and can spend any way you want. Social security money can be looked at as ‘frozen’ money because it’s yours, but not until you retire. Once you retire, then the money ‘unfreezes’ and is looked at as a liquid asset…that you will then be required to pay taxes on.
So, by using the theory of freezing your money, what other ways can you do this?
- Use Other Type of Retirement Savings
Just like Social Security, you can take advantage of your company’s 401K program and even invest in a Roth account. Any contribution you make toward these accounts are going to be tax-free. It’s money that you’re not spending, and it’s money that you don’t plan to spend for years to come. As a result, you shouldn’t be expected to pay taxes on it until you actually start spending it.
There are some pros and cons to this: You just never know what the tax rates will be once you choose to retire, but that’s a chance that everyone has to take. However, it’s better than having nothing at all.
- Take Advantage of CDs and United States (US) Savings Bonds
These days, US savings bonds might not be worth much, but if you’re able to freeze some of your currency there and earn a little bit of an interest, why not do that? A CD is another smart way to save money. With CDs, you have options. It’s recommended that you consult your financial advisor to learn about which type of CD to invest in.
- Health Related Expenses
Any money spent that’s going toward your health can be written off on your taxes. Sometimes, the amount exceeds the standard deduction. If that’s the case, by all means, use that number!
There’s also the opportunity to put money away in a healthcare savings account. Most employers offer this benefit. If your employer does, you can place a certain dollar amount into your healthcare savings account and that will be tax-free.
Other Ways to Save Money
There are many other ways that high-income earners can save tax dollars. Consult the professional experts at Success Tax Relief to learn about other smart ways you can save tax dollars. Call us at 1-877-825-1179 or contact us online. You can also email us today!