Tax Reduction Strategies Lake Forest
Generally, the more income you make, the more taxes you will be required to pay. But you can take advantage of tax reduction strategies Lake Forest services to pay lower taxes. An estate planning attorney can help you reduce your taxable income, preserve wealth, and ensure your assets are passed on to your heirs. These are legal strategies that can reduce your taxes considerably.
Make Charitable Donations as part of your tax reduction strategies
One of the tax reduction strategies Lake Forest you can use is making charitable donations. According to the Internal Revenue Service (IRS), you can donate about 50% of your adjusted gross income. The adjusted gross income is a measure that is used to establish what percentage of your total income can be taxed. It is calculated as gross income minus specific deductions such as retirement plan contributions, medical expenses, business expenses, and medical expenses. Deductions for any donations that exceed 50% of an individual’s adjusted gross income are usually carried over for the following 5 years. This means that you end up paying lower taxes from your income.
Popular Tax Reduction Strategies also include Sending Large Retirement Payments
As a wealthy individual, you can make large payments to your retirement plan without compromising on other expenses because you have more disposable income. This is a good way to lower your taxes. You can pay the maximum amount on your annual retirement contribution. The contributions to your retirement plan do more than lower your annual taxable income. Once you make the contribution, the money you have put away cannot be taxed until you withdraw it. This means that you safeguard your future and still pay fewer taxes. You can reduce your taxes further by relocating to a state that offers tax friendly options for retirees.
Get More Investments as Part of your Tax Reduction Strategies Lake Forest Plan
Another effective way to reduce your Lake Forest taxes is to get more investments. This is because investments are taxed at lower rates compared to employment income. The employment income is subject to both federal and state income taxes. On the other hand, investment income is only subject to federal taxes. This means that the more income you earn from an employer, the higher your tax rate.
In addition, employment income is subject to various payroll taxes including Medicare and Social Security. Being self-employed does not help you lower taxes because you will still be required to pay these taxes for your workers as an employer.
It is important to note that the kind of investment you make will also influence how much tax you pay. The investment period and your marginal tax rate also determine the rates paid on investment income. For qualified dividends, you will pay 0% tax if you are in the 15% or 10% tax bracket. But you will have to pay 15% tax on dividends if you are in any other bracket. This also applies to long-term capital gains. However, no tax is applied for municipal bond interests that are tax-exempt.
An estate planning attorney can help you build investment portfolios that will generate most of your income, allowing you to make use of the tax reduction strategies Lake Forest services. You have the resources required to take implement these strategies and this gives you a significant advantage over other individuals.