High Income Earners: Four Tips to Save on Your Taxes

Many people dream of earning six figures annually – or more! – but when that goal is accomplished, many are surprised to see just how high their tax burden becomes. This is because of the progressive tax system that is followed in the United States. To put it simply, the more you earn, the higher your tax rate becomes. Fortunately, there are many tax breaks and other options available to help lower the total tax bill you are responsible for each year.

Some of these are commonly referred loopholes, but they are legal options that were intentionally put in place by the government. Overlooking any tax break or other savings options is essentially giving the government money that you are not required to, so make sure you consider the following four tips to help save as much as possible on your taxes.

Charitable Giving

Most people know that charitable giving can help with taxes, but many don’t realize to what extent. According to current tax law, you are permitted to donate as much as 50% of your adjusted gross income, and deduct that amount from your total taxable income. For many high income earners, this can help them to push their tax bracket down, reducing the total amount they have to pay in taxes significantly.

Gifting Money to Loved Ones

This tip won’t save you money on your normal returns, but it can potentially reduce the amount of taxes your heirs have to pay when you pass away. The estate tax is often quite high, but you are permitted to gift your loved ones up to $13,000 per year tax free. This can be a great way to distribute a portion of your estate well before you pass away so that the total taxes paid will be significantly reduced.

Fully Fund Retirement Accounts

Retirement accounts such as 401(k)’s, Roth IRAs, and other IRAs are a great way to save money for retirement. They are also a nice way to reduce the amount of taxes you will have to pay. Find out which retirement funds you have available to you and put as much money as you can into them. Most options have limits that you can add each year, and they all have different tax implications. Ask a skilled accountant which types of retirement accounts will give you the best tax benefits in your specific situation.

These are all great ways to lower the total amount you will have to pay to the IRS each year. Of course, there are hundreds of other tax breaks on the books that you may qualify for. Some are quite small, and others very significant. Having a knowledgeable accountant on your team will help ensure you get all the deductions possible. Please contact me today to learn more!

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Written by Desnoyers CPA

Desnoyers CPA

Known for her friendly, outgoing nature and her rare talent for financial foresight, Lydia Desnoyers has been serving individuals and small businesses in Florida since 2010. After earning her Master’s Degree in Accounting from Nova Southeastern University and her Bachelor’s Degree in Accounting from Florida State University, she became a Certified Public Accountant and a Certified Fraud Examiner.