Hi all, I have a fairly complicated situation so thanks for bearing with me. I have recently done some tax projections and realized, to my surprise, that I owe a LOT of taxes (details below). I'm in need of some general advice as to what to -legally- do to curb this and also keep paying off my student loan as fast as possible.
The details:
- my wife works full time. She pulls in about $135k gross pay, we live entirely on this salary
- I do freelance video work for extra (and take care of our 3-yo son) and had a very good year (the main reason behind the "surprise" taxes) - I invoiced about $53k
- I have about $25k cash in the business account which I was hoping to put toward my student loan, and about $10k in our personal savings account as a rainy day fund (but could afford to empty this out if it is warranted)
- my student loans are about $40k (at 5.4%)
- I estimate a tax bill of over $18k
Once I calculate all of our deductions, the gross pay will come down significantly, but suffice it to say that, after the taxes I already paid, I estimate that I now owe about another $18k more in taxes than I projected thanks to a combination of events (my wife stepped up two pay grades, my company earned more than projected, tax rates went up, etc). Good thing I held on to the cash!
So, my questions are:
How do I minimize my tax burden aside from the obvious of finding every possible deduction for the family/business? Does it make sense to use the little bit of cash I will have left over to invest in some more company equipment? (I need a new computer for editing, so I could possibly spend as much as 3-5k on that, plus phone, projector, etc) Or, would it make more sense to use all of that cash toward the student loan? My goal was to cut the student loan in half this year since I can't stand the idea of renting that money any more than is absolutely necessary. I thought I was going to hit that, but it's not looking good now (I did pay 20k on it earlier in the year).
Also, would it make sense to dump as much cash as possible into an IRA of some kind? Perhaps opening an IRA as a sole proprietor? If so, where do I start with that?
Lots of questions but I'm trying to revive my inner mustachian now that the wind is out of my sails. Thanks for your time.