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How Can I Save Money on Taxes?

How Can I Save Money on Taxes?

February 15, 2024

This is one of the most common questions we get during tax time. The smart-aleck answer is, “Make less money!” But I know that’s not what you are really asking. The short answer to this question is, “It depends.” 

It depends on the type of taxable income you have. If most of your income tax is generated from wages, assigning those earnings to pre-tax earnings such as a 401(k) or an HSA are the simplest solutions. Real estate income or investment income earnings have different strategies. 

It depends on your goals. If you have a goal to be very giving, charitable donations can be a quick way to reduce your taxable income. If you have a goal to fund your children’s education, deductible 529 education accounts could be the best answer. 

It depends on what you own. If you have appreciated stock or fully depreciated real estate that may have a large capital gain, a Charitable Remainder Trust, a Delaware Statutory Trust, or another investment strategy. 

It depends on your lifestyle. Often the easiest steps to take are those not being taken because every dime earned is needed to pay debt payments and other monthly expenses. Making room in your budget to be tax-smart might begin with examining your current spending habits. 

It depends on what you think is going to happen in the future. If you feel tax rates are going to be higher in the future, you may WANT to pay taxes now. If you feel real estate is going to skyrocket, you may want all your cash to invest in real estate. 

Saving money on taxes may not be in your best interest. You can pay less in taxes by getting a large mortgage on your house. You’ll reduce the amount you pay to the government in taxes, but you’ll be paying a lot more to the mortgage company.  

Your unique situation deserves more consideration than a quick email response or common answer. Our team is ready to analyze your situation, discuss your goals, and recommend options which may reduce taxes, increase take-home dollars, or save for tomorrow and beyond.