Author Topic: Do Taxes Make Your Head Spin? Minimizing Tax Burden Help.  (Read 1721 times)

2Birds1Stone

  • Walrus Stache
  • *******
  • Posts: 5688
  • Age: 1
  • Location: Earth
  • K Thnx Bye
Taxes have never been a huge issue for me, my average income over the past 5 years has been $40-50k/yr putting me in a low tax bracket with not much of a burden. A career change this year has blessed me with an opportunity to make more money, and now being in a higher tax bracket I am looking at every way possible of lowering the tax bill at the end of the year. One of the biggest challenges I am facing is my employers 20% of base salary cap to 401k contributions. Commission is considered supplemental income and our company does not allow deferrals. I pleaded with HR and they will under no circumstance allow us to contribute more than 20% of base pay, for no good reason.

This means for 2015 I can only contribute $9,400 of the IRS imposed $18,000 limit to my 401k.
I have a HDHP and am contributing $3,300 which is the limit for single individuals.

Other than that I have no idea how to lower my tax burden, there is a good chance I will hit the 2015 limit for traditional IRA tax deduction which I believe is $71,000/yr. If I make below that I guess I could re-categorize my Roth IRA to traditional before doing taxes.

I have no kids, I rent, no taxable investments, no other tax deductions I could think of. If you were in my shoes, could you think of other ways to lower the tax bill?

johnny847

  • Magnum Stache
  • ******
  • Posts: 3196
    • My Blog
Re: Do Taxes Make Your Head Spin? Minimizing Tax Burden Help.
« Reply #1 on: July 04, 2015, 10:40:14 AM »
There aren't too many things you can do to lower your tax burden that doesn't increase your overall costs. The 401k/403b/457b, HSA, and IRA are among the few that lower your tax burden without increasing your overall costs.

I really can't think of anything else. But just remember, don't let the tax tail wag the dog. You're still earning far more money than the increase in taxes ;)

For your amusement (from a bogleheads thread)
Quote
The tax code is relatively simple: You pay less taxes when you earn less money. Some typical ways to reduce taxes:

1. Contribute max to 401(k) and self-employed retirement plans.
2. Contribute to Roth IRAs (only reduces future taxes, not today's taxes)
3. Invest tax efficiently (only reduces future taxes)
4. Give your money away to charity
5. Buy biggest house in world and pay huge property taxes
6. Have huge mortgage on that house and pay huge amount of interest
7. Get married and have lots of kids
8. Be sure to lose money in the stock market since $3000 of losses are deductible each year against ordinary income.
9. Move to a state with high income taxes because state income taxes are deductible.
10. Have severe health issues that you pay for out of your own pocket as you can deduct health care expenses above 7.5% of AGI
11. Grow old, you get more exemptions for being old
12. Go blind, you get more exemptions for being blind
13. Buy property and rent it out at a loss. The more losses the better.
14. Quit your jobs. With no earned income, it's not surprising that your taxes drop.
15. Avoid investments that create taxable income. You want losers to reduce your taxes.
16. Etc.

Or just pay the tax and enjoy life.
...
17. Hire accountants and investment advisors and pay them lots of money. Anything you pay them that is more than 2% of your AGI is deductible.

You can knock out two birds with one stone: stab yourself in the eye to satisfy #12 and #10.

2Birds1Stone

  • Walrus Stache
  • *******
  • Posts: 5688
  • Age: 1
  • Location: Earth
  • K Thnx Bye
Re: Do Taxes Make Your Head Spin? Minimizing Tax Burden Help.
« Reply #2 on: July 04, 2015, 10:43:07 AM »
There aren't too many things you can do to lower your tax burden that doesn't increase your overall costs. The 401k/403b/457b, HSA, and IRA are among the few that lower your tax burden without increasing your overall costs.

I really can't think of anything else. But just remember, don't let the tax tail wag the dog. You're still earning far more money than the increase in taxes ;)

For your amusement (from a bogleheads thread)
Quote
The tax code is relatively simple: You pay less taxes when you earn less money. Some typical ways to reduce taxes:

1. Contribute max to 401(k) and self-employed retirement plans.
2. Contribute to Roth IRAs (only reduces future taxes, not today's taxes)
3. Invest tax efficiently (only reduces future taxes)
4. Give your money away to charity
5. Buy biggest house in world and pay huge property taxes
6. Have huge mortgage on that house and pay huge amount of interest
7. Get married and have lots of kids
8. Be sure to lose money in the stock market since $3000 of losses are deductible each year against ordinary income.
9. Move to a state with high income taxes because state income taxes are deductible.
10. Have severe health issues that you pay for out of your own pocket as you can deduct health care expenses above 7.5% of AGI
11. Grow old, you get more exemptions for being old
12. Go blind, you get more exemptions for being blind
13. Buy property and rent it out at a loss. The more losses the better.
14. Quit your jobs. With no earned income, it's not surprising that your taxes drop.
15. Avoid investments that create taxable income. You want losers to reduce your taxes.
16. Etc.

Or just pay the tax and enjoy life.
...
17. Hire accountants and investment advisors and pay them lots of money. Anything you pay them that is more than 2% of your AGI is deductible.

You can knock out two birds with one stone: stab yourself in the eye to satisfy #12 and #10.

 HAHAHA Love it!