Question

What, if any, tax strategies have you put in place to lower your taxable income? What, if any, planning have you done for your retirement as it relates to your payroll deductions?

Answer 1

Part A) Tax strategies for lowering taxable income

1. INVEST IN MUNICIPAL BONDS

Municipal bonds are exempt from federal taxes and state and local taxes. Its interest payments are tax free.

2.Shoot for LONG TERM CAPITAL GAIN

Investments held for more than one year are taxed at a special rate under long term capital gain instead of ordinary income rate.

3. START A BUSINESS

In addition to creating additional income, a side business offers many tax advantages

4. Max out Retirement accounts

For 2019, taxable income can be reduced by $19000 when contributing to 401(k) plan or 4p3(b)

5. USE a HEALTH SAVINGS ACCOUNT (HSA)

Employees with a high deductible health insurance plans can also use HSA to reduce taxes. Withdrawal and earnings aren't taxed

6.GET IRS CREDITS

There are many IRS tax credits that reduce taxes such as earned income tax credit, child and dependent care credit.

Part B) planning for Retirement

For 2019, taxable income can be reduced by $19000 by contributing to defined contribution plan under 401(k) or 403(b)