Yes, it is possible to pay
We hear on the news that rich people avoid paying tax. We hear that rich people avoid their fair share of taxes. We hear how the average American is paying a higher and higher share of tax.
I am asked what strategies are available to pay less tax like the rich.
3 Strategies to Pay Less Taxes
Strategy Number 1: Tax Rates are your friend
Let’s get something clear…. If you are an employee you will be taxed on what you make and there isn’t much you can do about it.
I have clients making 6 figure incomes, they own a home and they get taxed. Let’s get something else clear. The tax laws are laws that apply to everyone and you are either able to take advantage of them or you are not.
John’s story perfectly illustrates this…
John has a photography business. He has a couple of children who are entering their teenage years. John was wondering whether he could do anything to lower his business taxes.
The answer is a resounding yes.
Children are fantastic and for more than just a tax break. When you own a business and have children, there is a way you can use the tax rates as your friend.
One of the simplest tax strategies is to move money over from the person with the higher income tax rate to the person with the lower income tax rate.
The person with the lower income tax rate can receive the money, possibly pay no taxes and have the money invested into a tax-free investment vehicle that can grow to millions over time. That saves taxes and it benefits the entire family business group.
Strategy Number 2: Investments are your friend
Jane works and she had her money invested. The problem is that her investments are costing her money at the highest federal income tax rate which now has been lowered to 37%. The highest federal capital gain rate is 20%.
Her financial advisor told Jane that paying taxes is a good thing because she is making money. She wondered what a tax professional might say.
The highest tax rate on investments that you hold and do not sell is zero.
That means that if you have money in investments which are growing and you keep them and don’t sell them you will pay no tax until you do. If those investments earn income such as dividends or interest you will pay income taxes.
If those investments are owned by your children they will pay income taxes at their income tax rates.
With this information, Jane was armed and went back to her financial advisor. The advisor told her that since she was invested in safe mutual funds that the managers of those investments buy and sell all the time and that’s what ends up on Jane’s tax return.
Jane asked whether the financial advisor could invest in stocks with similar low risk and not have to pay taxes. The financial advisor told Jane that he could put together some options for Jane to consider.
Strategy Number 3: Tax-Free is tax free
If I told you there is an investment out there that is tax free you probably wouldn’t believe me, but there is.
Not only is it tax free, but this investment is a way to increase the wealth of the family. The investment is life insurance. Just the mention of this word might draw groans and skepticism, however, life insurance is a tool that when looked at as an investment, just like stocks, bonds or real estate, its power is undeniable.
If you are a business owner and you think you are paying to much in taxes, we can look at your situation and determine what strategies will work for you to build, grow and sustain your wealth.
Are You Taking All of the Deductions Available for Your Business?
Take action by creating a long-range plan for your business that will help you keep more money in your pocket rather than the government’s.
Set up a meeting with one of our tax professionals and discuss ways to position your company for success by giving us a call at (760) 579-0079.
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Unless your situation is very straightforward we are well positioned to find ways that will more than compensate you for the time and cost you spend with us.