The Ultimate Tax Planning Strategy

The Ultimate Tax Planning Strategy
The taxes that are withheld from paychecks amount to​ about 25% of​ your gross pay (including federal tax,​ state tax,​ social security tax and medicare tax) .​
But these taxes that are withheld could be working for you​ as​ investments if​ you​ employ what I​ call the​ ultimate tax strategy .​
This tax strategy consists of​ how you​ plan to​ pay no taxes just like all of​ the​ large corporations .​
Large businesses have teams of​ accountants and lawyers going over the​ tax code to​ make maximum use of​ legitimate deductions.
In my opinion,​ there is​ a​ distinct difference between an​ individual and a​ business in​ the​ U.S .​
tax code (others have called it​ the​ difference between the​ rich and the​ poor) .​
Such as​ businesses are rewarded with tax deductions because they create jobs and engage in​ entrepreneurial activities that support individuals and government .​
But individuals are awarded few tax breaks because they don’t create jobs and don’t take risks that add substantial value to​ the​ economy .​
This is​ simply the​ fact and we just need to​ find a​ way to​ make the​ most of​ the​ few tax deductions that are available to​ wage earners as​ well.
When tax time comes around,​ the​ only substantial tax break most individuals have is​ a​ deduction for their home mortgage .​
This deduction is​ a​ social policy benefit to​ many people,​ but instead of​ helping people,​ it​ can motivate them to​ buy a​ larger home or​ higher mortgage than they would ordinarily afford .​
And unless you​ live in​ a​ neighborhood that continually appreciates,​ this is​ not a​ great strategy for you​ to​ target.
First,​ I​ need to​ make some big disclaimers about minimizing your taxes .​
There are many people in​ jail that have written books,​ tapes,​ websites and held seminars on​ how to​ never pay taxes .​
You can spot these people due to​ their focus on​ concepts that the​ IRS says are invalid; strained interpretations that haven’t held up in​ court,​ constitutional nonsense and a​ lot of​ straight fraud .​
Once the​ IRS audits these patriotic educators,​ the​ result is​ an​ invoice for back taxes,​ interest,​ penalties,​ and a​ jail or​ prison sentence .​
And illegal tax avoidance isn’t limited to​ wage earners .​
Nearly every month there is​ someone who tried to​ avoid taxes from a​ giant windfall (sold a​ company for millions,​ exercised stock options,​ received a​ large bonus) and paid some small shady offshore consulting company to​ create a​ fictitious tax loss to​ offset the​ big gain .​
The same thing happens; IRS files suit for back taxes,​ interest,​ penalties and possibly jail depending on​ the​ circumstances .​
The ultimate tax planning strategy works when you​ buy investments that have a​ positive cash flow (before any tax consequences),​ and give you​ a​ legitimate tax deduction as​ an​ added bonus .​
Now it​ is​ just a​ matter of​ buying enough of​ these investments to​ reduce your tax liabilities close to​ zero .​
If you​ have too much of​ these investments,​ the​ IRS limits tax loss carry-forwards,​ and you​ may end up losing them.
The two legitimate deductions that I​ want to​ mention are real estate depreciation and oil well depletion .​
You are buying something that is​ going to​ put money in​ your pocket (or a​ very high probability of​ success),​ and because it​ is​ in​ alignment with government policy,​ they give you​ a​ tax deduction to​ take this risk.
To figure out how much of​ a​ deduction that you​ need,​ start with your 1040 federal tax form .​
Add together the​ Standard Deduction (which is​ around $3,​000) and your itemized deductions from Schedule a​ .​
The difference between the​ number that you​ just calculated and your actual Adjusted Gross Income is​ the​ amount of​ depreciation you​ need to​ acquire for the​ ultimate tax strategy.
Investment real estate depreciation is​ calculated over 29.5 years right now,​ so take the​ amount of​ depreciation that you​ need and multiply it​ by 29.5 to​ calculate the​ purchase price you​ need to​ buy .​
(Note that depreciation is​ limited to​ $25,​000 per year unless you​ meet the​ IRS qualifications as​ a​ real estate professional .​
The taxing authorities don’t like wage earners taking these types of​ deductions so there are many limits on​ them,​ including the​ Alternative Minimum Tax,​ to​ block you​ from taking excessive deductions).
Now even if​ you​ aren’t able to​ buy enough tax deductible investments to​ get your taxable income all the​ way down to​ zero,​ any investment that meets the​ IRS rules for a​ deduction,​ and is​ a​ positive cash flow investment,​ will increase your net worth,​ reduce your taxes and thus create more money available to​ you​ to​ spend or​ invest.
The Ultimate Tax Planning Strategy The Ultimate Tax Planning Strategy Reviewed by Henda Yesti on July 04, 2018 Rating: 5

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