For those with high HHI ($500K), tax saving strategies

[Anonymous]

OP, you need a side business: rental income, landscaping, tutoring, house cleaning, remodeling, etc.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Talk about first world problems lol my 30% tax rate is twice the median household income in the US whatever can I do about it?

Well most of us got to that place by choices we made. I grew up poor, neither parent went to college, I've had free lunch several years in school, and we were on/off from food stamps whenever parents were laid off. Yet I managed to go to college, pay off my college debt and do well in life. Nothing was handed to me, I had to work hard for it all. Yes, I recognize there are others who have it "worse" but my life wasn't a picnic. I just knew working hard and an education was key to a better life. Then I chose to live within my means and save save save and take career risks to advance.
The fact that those making $178K+ pay approximately 80% of the taxes in the US means that why yes we are in fact providing for the vast majority of society. It's our taxes that make roads, infrastructure, schools, and everything else happen. We more than pay our "fair share"

You acknowledge that for years you benefited from government programs. And now you don't want to pay into them?

Can you read? We have contributed far more than most. My family used those benefits for a total of about 2 years in my lifetime. We've paid $500K+ into medicare in our lifetime (probably much more), and that's just medicare. Happy to pay, but at some point, no I don't need to pay more. So we will do what we can to avoid estate tax issues (at both federal and StaTE level---our state starts much lower and would affect many people more than just us). That money was taxed once and we don't need to send 40% of everything above $3M to our state when we die.

We also contribute smartly to organizations that provide much more than the govt does with our tax dollars. I'd prefer to have it go locally to organizations that actually maximize it

[Anonymous]

Anonymous wrote:Over the last few years, we have done well with our HHI but cringe at tax time. Together, we pay close to $150+K in federal taxes. I asked our CPA if there are ways to reduce our taxes, he said as W2 employees, we don't really have many options. He didn't really give us any "outside the box" ideas. We max out our retirement accounts, HYSA. CPA said we can't use home office (we work from home sometimes) as a deduction.

I was curious as to how some folks reduce their tax burden legally...Any ideas, please share.

500k is not a high income. Certainly not high enough for any but very conventional tax strategies. Even $1 million is not different.

[Anonymous]

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Anonymous wrote:So let me get this straight. You asked a CPA. You didn't like the correct answer s/he gave you. And so you thought you'd crowd source this?

Maybe count your blessings to be doing so well that you can contribute that level of taxation and be glad you don't live in other places of the world where taxes are higher (because the USA is basically the world's tax haven).

The short answers is the same your CPA gave you. You're salaried employees. Short of increasing exclusions like 401K contributions, there really are no magic tricks here. And thank God for that. Pay your fair share, damnit.

Why is reducing someone's tax burden a bad thing all of a sudden?

It isn't! Most of us in the making $178K and up are paying the majority of taxes in this country. Someone making $500K is paying even more. But yet we don't use the roads or services any more than the person not paying any taxes or paying barely anything. SO yes, we are happy to contribute, but the solution to a budget problem is not to tax us more....it's to budget better.

Smart people work within the law to minimize their taxes. And for W2 workers it is challenging. And yes, when I have paid more in Federal taxes than most will earn in a lifetime, I think I've paid my fair share and would rather have my money to direct to charities that actually fully utilize the money (and to my own family and friends)

Agreed. I’m tired of the assumption that government is the most efficient and benevolent spender of our money. Don’t get me started on state and local taxes. Always going up and so much grift.

Interest on the debt, defense, social security, and Medicare makeup the overwhelming majority of spending. Unless you think that money is poorly spent, you don’t have much of a point. Income and food support for poor people is 6% of the budget. Medicaid is another 10%. Compare that 16% to the 50% of Americans who have no savings and live literally paycheck to paycheck and it’s clear that the poor are not draining the bank.

In the last 40 years, the overwhelming winners have been the upwardly mobile and wealthy, as they have been the great beneficiaries of repeated tax cuts and equity gains. The wealth divide is growing for a reason, and it isn’t because the well-off are paying too much in taxes. Instead of moaning each year about taxes paid, the wealthy should be shouting from the rooftops about how much money they made.

I am aware of the spending pie. You do realize that interest on the debt didn’t just magically appear as a line item? That we have to have debt to have massive interest payments? And the debt was cause by overspending?

Yes the defense budget is extremely high.

And USG spending skyrocketed during COVID and we never course corrected on spending after that.

And you do realize that much, if not all, of that debt reflects massive and repeated tax cuts for 40 years? Yes, the debt reflects overspending RELATIVE TO REVENUE. It’s been one party’s goal to eviserate basic safety net programs by claiming they’re too expensive by using the accumulated debt as “proof.” That same party doesn’t want to admit that even with reduced tax rates, small businesses and the wealthy OVERWHELMINGLY underpay their taxes. In fact, the IRS claims that those groups underpay taxes by $500 billion/year. Why do you think the same party has repeatedly undercut robust tax enforcement and most recently negated the hiring of 80k IRS agents? Why has the Administration massively cut enforcement at the SEC and every other financial watchdog? Why has the President mostly pardoned people who have committed financial crimes? As for COVID money, a third went directly to individuals. Another third to businesses and the rest to state governments and healthcare organizations. Yet, 70% of the COVID fraud occurred in businesses — that’s a fraud rate twice their benefit share. So, who here are the greedy and undeserving.

So of us in the top tax brackets don't vote for our tax cuts. It's literally the only perk having our current president (well that and the estate tax being set at $15M+ and likely not to change). otherwise, we voted for this not to happen.

And most of us don't cheat on our taxes---there is no way to avoid it.

But just like I live within my budget (even when I was lower income), The govt needs to learn to do that as well.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Talk about first world problems lol my 30% tax rate is twice the median household income in the US whatever can I do about it?

Well most of us got to that place by choices we made. I grew up poor, neither parent went to college, I've had free lunch several years in school, and we were on/off from food stamps whenever parents were laid off. Yet I managed to go to college, pay off my college debt and do well in life. Nothing was handed to me, I had to work hard for it all. Yes, I recognize there are others who have it "worse" but my life wasn't a picnic. I just knew working hard and an education was key to a better life. Then I chose to live within my means and save save save and take career risks to advance.
The fact that those making $178K+ pay approximately 80% of the taxes in the US means that why yes we are in fact providing for the vast majority of society. It's our taxes that make roads, infrastructure, schools, and everything else happen. We more than pay our "fair share"

You acknowledge that for years you benefited from government programs. And now you don't want to pay into them?

Can you read? We have contributed far more than most. My family used those benefits for a total of about 2 years in my lifetime. We've paid $500K+ into medicare in our lifetime (probably much more), and that's just medicare. Happy to pay, but at some point, no I don't need to pay more. So we will do what we can to avoid estate tax issues (at both federal and StaTE level---our state starts much lower and would affect many people more than just us). That money was taxed once and we don't need to send 40% of everything above $3M to our state when we die.

We also contribute smartly to organizations that provide much more than the govt does with our tax dollars. I'd prefer to have it go locally to organizations that actually maximize it

You haven’t contributed enough. Freedom is priceless. Your contributions are still needed to support our defense spending. We all benefit from it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Talk about first world problems lol my 30% tax rate is twice the median household income in the US whatever can I do about it?

Well most of us got to that place by choices we made. I grew up poor, neither parent went to college, I've had free lunch several years in school, and we were on/off from food stamps whenever parents were laid off. Yet I managed to go to college, pay off my college debt and do well in life. Nothing was handed to me, I had to work hard for it all. Yes, I recognize there are others who have it "worse" but my life wasn't a picnic. I just knew working hard and an education was key to a better life. Then I chose to live within my means and save save save and take career risks to advance.
The fact that those making $178K+ pay approximately 80% of the taxes in the US means that why yes we are in fact providing for the vast majority of society. It's our taxes that make roads, infrastructure, schools, and everything else happen. We more than pay our "fair share"

You acknowledge that for years you benefited from government programs. And now you don't want to pay into them?

Can you read? We have contributed far more than most. My family used those benefits for a total of about 2 years in my lifetime. We've paid $500K+ into medicare in our lifetime (probably much more), and that's just medicare. Happy to pay, but at some point, no I don't need to pay more. So we will do what we can to avoid estate tax issues (at both federal and StaTE level---our state starts much lower and would affect many people more than just us). That money was taxed once and we don't need to send 40% of everything above $3M to our state when we die.

We also contribute smartly to organizations that provide much more than the govt does with our tax dollars. I'd prefer to have it go locally to organizations that actually maximize it

You haven’t contributed enough. Freedom is priceless. Your contributions are still needed to support our defense spending. We all benefit from it.

Haaa! Yup, that's one of the main issues!

But yes, even after paying ALL of that into medicare, when we turn 65, we get to pay ~$1K+ just for part B and a gap plan. Add in more for prescription coverage. So we still will pay $2400/month for the 2 of us to have basic medical coverage. It's ridiculous

[Anonymous]

Anonymous wrote:

Anonymous wrote:Talk about first world problems lol my 30% tax rate is twice the median household income in the US whatever can I do about it?

Well most of us got to that place by choices we made. I grew up poor, neither parent went to college, I've had free lunch several years in school, and we were on/off from food stamps whenever parents were laid off. Yet I managed to go to college, pay off my college debt and do well in life. Nothing was handed to me, I had to work hard for it all. Yes, I recognize there are others who have it "worse" but my life wasn't a picnic. I just knew working hard and an education was key to a better life. Then I chose to live within my means and save save save and take career risks to advance.
The fact that those making $178K+ pay approximately 80% of the taxes in the US means that why yes we are in fact providing for the vast majority of society. It's our taxes that make roads, infrastructure, schools, and everything else happen. We more than pay our "fair share"

Billionaires have gotten sweet deals thanks to Trump and thanks to their “donations” to Trump. There was an in depth investigation on Jared Kushner. A billionaire with massive real estate holdings. Thanks to some convenient loopholes in the tax code regarding owning residential buildings, Jared paid ZERO federal tax.

Jared Kushner paid little to no tax from 2009 through 2016 when he was appointed as a White House advisor. He’s a real estate developer and benefited from generous deductions for them. While working in the White House in 2017 he received 82 million in outside income.

Look up most billionaires and they will have some tax free years.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Talk about first world problems lol my 30% tax rate is twice the median household income in the US whatever can I do about it?

Well most of us got to that place by choices we made. I grew up poor, neither parent went to college, I've had free lunch several years in school, and we were on/off from food stamps whenever parents were laid off. Yet I managed to go to college, pay off my college debt and do well in life. Nothing was handed to me, I had to work hard for it all. Yes, I recognize there are others who have it "worse" but my life wasn't a picnic. I just knew working hard and an education was key to a better life. Then I chose to live within my means and save save save and take career risks to advance.
The fact that those making $178K+ pay approximately 80% of the taxes in the US means that why yes we are in fact providing for the vast majority of society. It's our taxes that make roads, infrastructure, schools, and everything else happen. We more than pay our "fair share"

Billionaires have gotten sweet deals thanks to Trump and thanks to their “donations” to Trump. There was an in depth investigation on Jared Kushner. A billionaire with massive real estate holdings. Thanks to some convenient loopholes in the tax code regarding owning residential buildings, Jared paid ZERO federal tax.

Jared Kushner paid little to no tax from 2009 through 2016 when he was appointed as a White House advisor. He’s a real estate developer and benefited from generous deductions for them. While working in the White House in 2017 he received 82 million in outside income.

Look up most billionaires and they will have some tax free years.

Yes, and that is who should be paying "more taxes". Not those worth "only $10-30M" who paid full taxes on everything they earned (either as cap gains or W2/dividend income---whatever the law was). We don't need to be raising taxes on someone making $500K-1/2M per year, they most likely pay taxes at 37% on everything over the limit.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Talk about first world problems lol my 30% tax rate is twice the median household income in the US whatever can I do about it?

Well most of us got to that place by choices we made. I grew up poor, neither parent went to college, I've had free lunch several years in school, and we were on/off from food stamps whenever parents were laid off. Yet I managed to go to college, pay off my college debt and do well in life. Nothing was handed to me, I had to work hard for it all. Yes, I recognize there are others who have it "worse" but my life wasn't a picnic. I just knew working hard and an education was key to a better life. Then I chose to live within my means and save save save and take career risks to advance.
The fact that those making $178K+ pay approximately 80% of the taxes in the US means that why yes we are in fact providing for the vast majority of society. It's our taxes that make roads, infrastructure, schools, and everything else happen. We more than pay our "fair share"

Billionaires have gotten sweet deals thanks to Trump and thanks to their “donations” to Trump. There was an in depth investigation on Jared Kushner. A billionaire with massive real estate holdings. Thanks to some convenient loopholes in the tax code regarding owning residential buildings, Jared paid ZERO federal tax.

Jared Kushner paid little to no tax from 2009 through 2016 when he was appointed as a White House advisor. He’s a real estate developer and benefited from generous deductions for them. While working in the White House in 2017 he received 82 million in outside income.

Look up most billionaires and they will have some tax free years.

Yes, and that is who should be paying "more taxes". Not those worth "only $10-30M" who paid full taxes on everything they earned (either as cap gains or W2/dividend income---whatever the law was). We don't need to be raising taxes on someone making $500K-1/2M per year, they most likely pay taxes at 37% on everything over the limit.

Agreed. We also need to tax portfolio loans. That’s the biggest way the billionaires avoid taxes - they never have any realized gains.

[Anonymous]

Relatively high earning W-2 employees have very few tax advantage strategies. The tax code is designed to encourage business development not workers. It sucks.

[Anonymous]

Anonymous wrote:OP, you need a side business: rental income, landscaping, tutoring, house cleaning, remodeling, etc.

Let’s say they have a side gig doing tutoring and earn a few extra bucks that way. How can that benefit someone earning 500k+ ?

Or you mean it needs to be an actual business where they hire others?

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP, you need a side business: rental income, landscaping, tutoring, house cleaning, remodeling, etc.

Let’s say they have a side gig doing tutoring and earn a few extra bucks that way. How can that benefit someone earning 500k+ ?

Or you mean it needs to be an actual business where they hire others?

I think they mean a side business that loses money for the tax write off

[Anonymous]

Anonymous wrote:401k
mega back door Roth will avoid taxes over time
HSA
I bonds
Tax efficient investment allocation
529
Flexible spending accounts

OP shouldn’t do this now, in a high tax bracket. The time to do it is is between retirement and RMDs.

[Anonymous]

Anonymous wrote:

Anonymous wrote:401k
mega back door Roth will avoid taxes over time
HSA
I bonds
Tax efficient investment allocation
529
Flexible spending accounts

OP shouldn’t do this now, in a high tax bracket. The time to do it is is between retirement and RMDs.

They should because the most powerful tool to make money is time in market. So paying taxes now to put money into a Roth even at the higher rate means you get decades of tax free growth.

[Anonymous]

Invest in opportunity zone funds. You don’t get a deduction going in, but you can create a lot of tax free wealth 10 or more years down the road.