Income Tax hacks

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Kriegsspiel
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Re: Income Tax hacks

Post by Kriegsspiel » Tue Apr 19, 2016 8:33 pm

I'd rather have an HSA than an FSA; money in an HSA doesn't expire. I also just pay for medical stuff out of pocket, and let my HSA account sit there and compound.

Tax loss harvesting is another good one.
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Re: Income Tax hacks

Post by WiseOne » Tue Apr 19, 2016 8:53 pm

Second the HSA.  You can't get a high deductible insurance policy with your job, and supply the HSA yourself?

If you have self-employment income:  open a solo 401K and take advantage of the profit sharing contributions on top of your $24K tax deferral limit.

US savings bonds (deferred interest) for deep cash

Roth IRA contribution, direct or back door - no immediate tax savings but investment earnings are not taxed.

Donate piles of old crap to Goodwill in the years that you get to itemize.  For all but the big ticket items, I find that this gets me at least what I could have got by selling, for a LOT less effort.
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Xan
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Re: Income Tax hacks

Post by Xan » Tue Apr 19, 2016 8:57 pm

WiseOne wrote:Roth IRA contribution, direct or back door - no immediate tax savings but investment earnings are not taxed.
I think this is just what you don't want to do when you're in a high tax year expecting low ones later.  The investment earnings aren't taxed either in a Roth or in a Traditional.

The only argument for doing this I can think of is that for a given amount of money contributed, you can effectively tax-shield more money in a Roth than in Traditional, because Roth contributions have already been taxed.
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ochotona
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Re: Income Tax hacks

Post by ochotona » Tue Apr 19, 2016 9:06 pm

WiseOne wrote: Second the HSA.  You can't get a high deductible insurance policy with your job, and supply the HSA yourself?
Yes, if you buy an HSA-compatible health insurance plan, you can do this.

Make charitable donations of appreciated securities; give away your capital gains.

If you have a low-income year, when you are in the 10% or 15% tax bracket, take your capital gains that year; the cap gains tax rate will be 0% for you during that year.
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Re: Income Tax hacks

Post by barrett » Tue Apr 19, 2016 9:07 pm

For self-employed people, pushing some of that November and December income into the following calendar year can be a big bonus. People are generally willing to put off payment for services by several weeks. This works best if one's income is up and down (income from a banner year is pushed into the following year which may not be so great). But in general sliding some income forward a year is an idea I like.

Also for self-employed folks, accelerating deductible expenses can really help (paying for stuff in December instead of January).
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MachineGhost
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Re: Income Tax hacks

Post by MachineGhost » Tue Apr 19, 2016 11:15 pm

Desert wrote: Right now I want to defer taxes at the top of the rate spectrum.  I'm essentially looking for any deferment options available.
We brought this up before, but you could consider discounted annuities and whole life mutual group insurance so long as you keep the fees ultra low and stick it out long enough to get a positive return (usually 7 years minimum).  Beyond that, you're looking at complex tax avoidance structuring with entities.
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Mark Leavy
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Re: Income Tax hacks

Post by Mark Leavy » Tue Apr 19, 2016 11:19 pm

Too many times when we discuss taxes we think of taxes as an employee.
W-2 wages and investments.

Optimizing these taxes is optimizing the small.  Move away from the employee mindset.

Better to move taxes away from W-2 to K-1.

Then ditch the K-1 and move to 1099-INT and 1099-DIV and capital gains.

If you are still employed, figure out how to leave that system.  All of the worst taxes are geared to harvest the fruit of the employee.  Don't continue hacking at the leaves.  Hack at the root.
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Mark Leavy
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Re: Income Tax hacks

Post by Mark Leavy » Tue Apr 19, 2016 11:28 pm

A long time ago, I used to work at Intel Corporation.

I still know a lot of folks there.

Today, Intel announced that there will be a Decimation.  Literally.  1 in 10 will get the knife.

People are scrambling.  Some will get a VIP retirement package.  Some will be shown the door.  Some will be offered a translocation package (or out the door).

Taxes are something we all need to think about - but never forget that they are just fine tuning.
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Re: Income Tax hacks

Post by WiseOne » Wed Apr 20, 2016 7:56 am

Desert wrote: I'll have to research the HSA further.  I think it likely won't work for me, because I have a very low deductible, cheap plan provided by my employer.  In other words, I probably don't want to sacrifice a low deductible plan in the name of tax savings, and come out behind in net dollars.  But it's something I need to evaluate further. 
Yes, you have to run your own numbers.  Just don't rely on tools provided by the employer - if they're anything like mine they are flat incorrect, because they don't account for the HSA tax benefit.  The tax-free investment gains are gravy.  Assuming the investments gain, of course :-)  That's my thinking on a Roth:  the more you can stuff in there the better.  You can still withdraw contributions in a pinch, so there is no reason to skip this.  Note however that if you have to go the backdoor route, those are conversions and are subject to the 5 year holding period.

Incidentally, even if your company provided an HSA, you shouldn't use it long-term because it probably provides no worthwhile investment choices and is loaded with fees.  The only reason to use it is that contributions by payroll deduction are not subject to FICA taxes.  Once there, move them out periodically into your own HSA.  I went with HSA Bank plus the linked TD Ameritrade account.
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Re: Income Tax hacks

Post by WildAboutHarry » Wed Apr 20, 2016 9:44 am

[quote=Mark Leavy]Too many times when we discuss taxes we think of taxes as an employee.
W-2 wages and investments.

Optimizing these taxes is optimizing the small.  Move away from the employee mindset.

Better to move taxes away from W-2 to K-1.

Then ditch the K-1 and move to 1099-INT and 1099-DIV and capital gains.

If you are still employed, figure out how to leave that system.  All of the worst taxes are geared to harvest the fruit of the employee.  Don't continue hacking at the leaves.  Hack at the root.[/quote]

Just so.

This sounds suspiciously like distributism!
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