When you have a high-paying job, you may run into some difficulties when it comes to your taxes. Hiring a skilled accountant to help you reduce some of your tax liabilities can be very helpful. It is true that the more you get paid the more you pay in taxes, but this doesn’t always need to be the case. With proper tax planning, you can continue to take out standard deductions and others while lowering the amount you pay. Here are some ways high-income earners can reduce tax liabilities.
Max out your retirement
When you have a retirement account through your employer, every penny you put into it isn’t taxed until you take the money out. This is a very easy way to reduce your taxable income every year. By adding more money to your savings and using it while you’re retired, you could be put into a lower tax bracket when that time comes. You’ll be paying taxes at a lower rate than you would of when you were making a high income. In 2020 the max amount you were able to put into your 401k was just under $20,000. Get in touch with your financial advisor and see how much you can sacrifice saving early without it being a burden.
Investing in municipal bonds doesn’t always sound too appealing, but tax-exempt bonds could be a good choice for high-income earners. Municipal bonds allow you to lend money in exchange for interest being paid to you over time. The good news about tax-exempt bonds is that you don’t have to worry about income taxes, whether state, federal or local. Believe it or not, even the interest payments you’ll receive from these bonds are exempt from taxes. This is a great strategy for anyone trying to reduce their tax liabilities, whether you have experience with bonds or not.
Become a donor
As many people already know, donating money to charities allows you to write it off as a tax deduction during that year. If you want to get deep into it, then you should consider donor-advised funds. This allows you to set up and decided when to allocate your funds to charities. The donations made throughout one year can be deducted throughout multiple years, meaning your tax bill will be reduced. Before deciding on how much to donate every year, talk to your financial advisor to see how much could lower your tax liabilities the most.
Securities offered through Kalos Capital, Inc. and Investment Advisory Services offered through Kalos Management, Inc., both at 11525 Park Woods Circle, Alpharetta, GA 30005, (678) 356-1100. Retirement Income Strategies is not an affiliate or subsidiary of Kalos Capital, Inc. or Kalos Management, Inc.