Tax Efficient Not Avoidance

Another tax topic, sorry I cannot help myself. Few things are certain. When you earn income you pay taxes. My Dad always says, if you are paying taxes that is a good thing, that means you are making money. 

As a CPA, I am always asked, “how can I save money on my taxes”? The answer is there are no magic tricks or solutions. I encourage you though to use all the tools in your tool kit to reduce your taxable income. What is my tool kit you might ask? The tool kit allows you to manage your personal wealth tax efficiently. Here are a few examples. Retirement plans(IRA’s and 401K) and 529 plans allow assets to grow without tax or tax deferred. Tax credits and deductions reduce taxable income. An investment portfolio can be managed tax efficiently. 

Key Takeaway: Anyone that makes income should be making contributions to a retirement plan. Make as big of a contribution as you can afford, subject to IRS limits also! Increase your contribution when you can, maybe with a bonus or pay raise. If you do not have a retirement plan look into IRA’s. There are a couple of options so check which one applies to you. You might be saying of course I do this, great, you have taken the first and easiest step to tax efficiency. You get the picture now lets look to do more. 

The tool kit is bigger than you think, When was the last time you reviewed your personal wealth profile to see how tax efficient you are? Happy to share a few ideas that I have or validate your ideas, contact me at [email protected].