Ben Todd | Apr 16, 2017 | 3
How To Pay Fewer Taxes in the US
Guess what…there are no ways you may pay fewer taxes in the USA. If you try, then the IRA will nail you to the wall. It may take them a few years before they catch up with you, but they are happy to delve seven years into your past, and unbeknown to many, they may go as far back as they like if they prove a crime or fraud was involved. There are no ways to pay fewer taxes in the US.
Here Is How You Pay Fewer Taxes
The truth is that you are not able to lower the amount of tax you pay, you have to pay what you owe and there is nothing more to it. What many people do not understand is that they are probably paying too much tax.
Repeat…there is a very good chance that you are paying too much tax. If you are one of the many people who are overpaying, even if you have an accountant, then you can lower the amount of tax you pay because you are paying too much of it.
The Legal Amount You Are Supposed To Pay In Tax
What you need to do is forget the idea of lowering your taxes, and start thinking about how you may pay your correct share of tax. Some people refer to these as loopholes, but they are 100% legal and for the benefit of everybody.
For example, some people donate to charity at the end of the year and deduct it from their tax bill. This is quite legal and is a beneficial way of keeping your tax bill lower. However, if you think about it, the money that was donated could have been paid off as tax, and in both cases the person with the money loses it (either to charity or a tax bill), so it is not much of a loophole.
The Trump Comment That Some Less Intelligent Websites Make
I will not name and shame the websites because silly people don’t deserve credit for their idiocy, but they say that President Donald Trump was able to dodge taxes because he made a loss of $916 million. Such people whine that he didn’t have to pay income tax for a few years after the loss, but they seem to overlook the fact that he lost nearly one billion dollars. If you made a massive loss, such as losing your business, wouldn’t you want a few years tax free to get back on your feet. He may have been allowed to miss a few years of income tax, but the amount he missed was a tiny fraction of the amount of money he lost.
The USA is one the worst country in the world when it comes to battering people with taxes, which is why it is reassuring that the IRS will give you a little break from taxes if you suffer a big loss. You shouldn’t blame Trump for following the law, and you should follow it yourself to ensure you pay the correct amount of tax and not too much.
You Need To Understand How Tax Works In The US If You Wish To Pay Fewer Taxes
I am not saying that you should take up a qualification in accountancy just so that you may save a few thousand on your tax return each year. The documents that guide the IRS for just federal tax (not the many others, just federal tax) are over ten million words long, which is why audits are often more flexible than people realize because nobody can know all the rules in a document of that size. There are rarely hard and fast rules that cannot be interpreted subjectivity. Your job is to interpret them and apply them in a legal way. Below is a video explaining US taxes and the plight of people like yourself who will soon be big wealth builders.
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Understanding taxes is very difficult, especially when start delving into the specifics of your personal situation. However, thanks to the Internet and online libraries on government websites, you are able to look up and research the rules that apply to you. For example, do you think your state allows you to deduct your gambling losses? These days, you can go online to the government websites and find out.
Obviously, it would be nice if people paid a flat tax so that there was no confusion and so that poorer people could be taken out of taxation completely. Money Magazine once gave a tax return to 46 tax preparers, and they received 46 different estimates back. That is because tax law is so massive and confusing that you can make reasonable arguments for a range of different estimates.
Where Do I Start Looking?
Remember that the key to paying fewer taxes is not to try to look for some sort of secret or a loophole. It is to do your research to find the correct amount of tax that you are supposed to be paying. You are probably paying too much, and by learning more about what taxes apply to you, it becomes more obvious where you are overpaying and where you are not.
Look Into Earned Tax Credits
In the US, you may qualify for an “Earned Income Tax Credit” if you earn less than $50,000 per year. You may be able to save yourself up to $6000.
Learn About Mortgage Interest Payment Deductions
You may be able to claim your interest payments on your mortgage as deductions. Some article say that you should keep your mortgage as long as possible for this reason, but why pay an extra $50,000 on your mortgage just to save $7000.
Find Out About Your IRA and 401K
The government cannot afford to pay for you when you get older, so there are tax incentives created to encourage you to put money away for your retirement. Do it correctly, and do not withdraw too early, and you can save a lot of tax money.
Keep Track Of Your Gifts
If you give to charity, then make sure it is itemized and follows all the rules relating to your current tax code. There are many rules around how you may give to charity, but you may also give to other people in a move called “Gift splitting.”
There Are Tax Deductible Medical Expenses
There are some medical expenses that you may deduct from your tax bill. A relatively unknown one is breast pumps. The list of all the things you can claim for is massive, so it is well worth going to their IRS.gov and doing your research if you have paid for any medical treatment over the last year.
Do Some Research Into Energy Efficiency
Climate change is a big deal these days, and even though if we collectively stopped producing gas today, the earth’s temperature would still rise over the next 15 years, governments are still trying to stop the impending apocalypse that is a burnt out earth. The US government still has a few eco-friendly tax incentives/breaks/deductions on offer.
Move To Another State With Lower Taxes
State taxes differ depending upon state tax rates and what they allow as deductions. Below are a few figures showing five US states with the lowest tax rates. If they appear a little confusing, then consider the difference between the national average and the state average, as that is the most telling figure. For example, the state with the lowest taxes is Alaska, as their rates are 45.85% less than the national average.
•Total local and total state tax rate: 5.69%
•Average amount paid by people in the state: $3,066
•The difference between the national average and the state average: -46.85%
•Total local and total state tax rate: 6.02%
•Average amount paid by people in the state: $3,246
•The difference between the national average and the state average: -43.74%
•Total local and total state tax rate: 6.92%
•Average amount paid by people in the state: $3,728
•The difference between the national average and the state average: -35.37%
•Total local and total state tax rate: 7.45%
•Average amount paid by people in the state: $4,015
•The difference between the national average and the state average: -30.4%
•Total local and total state tax rate: 7.72%
•Average amount paid by people in the state: $4,161
•The difference between the national average and the state average: -27.86%
Conclusion – If You Want To Save Tax Money…Then Move To Another State
Consider how much other people are paying. People in New York are paying a total local and total tax rate of 12.7%. Even with a slew of tax deductions, and even with a few tax loopholes, you are not going to pay less tax living in New York than you are living in Alaska. The state average is just $3066, and don’t forget that you can probably find a few further deductions if you do your research. Use what you have learned in this article to set off your personal research into paying the correct amount of tax, and remember that your best option may be to simply move to a state with lower taxes.