“Understanding income tax is the gamechanger…”
Are you starting to prepare for tax season? Do you ever worry about how much money you’ll need to pay in taxes? Considering tax payments are one of our single biggest expenses, paying less taxes helps us to build financial freedom and create more successful opportunities in the future.
So, one of the most widely asked questions is, “How can you make more and pay less tax legally?” The truthful answer is, it’s very simple. It’s not how much you make that determines how much tax you’ll end up paying. It’s how you make it.
Most people don’t know this, but there are certain income types that are considered “tax-free income” as it is not subject to any income tax whatsoever. And so, one of the best ways to pay less in taxes or avoid it altogether, legally, is to earn income that is tax-free, as much as possible!
For example, to do this, you can sell your home, as there is a home tax exclusion, investments such as municipal bonds, and other benefits that stem from health insurance and savings account contributions.
Another way is by investing money into a Roth IRA, as you will never have to pay tax on the earnings. For example, if you invested $5,500 into apple stock 10 years ago, you would have made $34,254 and if you would have invested your earnings into a Roth IRA, you would have never had to pay tax on the profit.
For those of you who are unfamiliar with a Roth IRA, a Roth IRA is an individual retirement plan (a type of qualified retirement plan) that is similar to a traditional IRA. The biggest distinction between the two is what happens in regard to taxes. A Roth IRA is funded with after-tax dollars, meaning the contributions are not tax-deductible. But once you start withdrawing funds, the money is tax-free. In contrary, traditional IRAs are funded with pre-tax dollars meaning the contribution are tax deductible.
Once you create a plan of action and use tax strategies in your benefit, you can begin to make money and not pay as much in taxes and learn more about ways to best fit your personal situation before making any unnecessary contributions.
Hiring a financial planner like those on the ERPS Group Team can help you to design a special tax plan, which will provide you with the financial security you need and deserve.
Interested in hearing more tax tips? ERPS Group is a one-of-a-kind financial firm located in Metro New York City that offers a differentiated approach to helping people to achieve enduring financial results and support in choosing the perfect life insurance plan. They offer effective strategies that help to bridge the gap between financial freedom and personal or business goals.
Contact us today at (347) 462-2778.