One of the best ways to teach your kids about taxes is to buy them an ice cream and then take a bite of it. The chances are high that your kids will start crying. We feel the same emotions when Tax Day comes around. Sure, we can’t just start crying and hope that our problems go away.
Instead, we have to fill out forms, groan, implement some strategies, whine to our friends, and then fill out some more forms. The adult life is not easy, but there are some strategies that might make next year’s returns a bit easier. Click here to read more.
The first thing you need to understand is that your income can get taxed in so many different ways. First, you have the federal and state levels, and then you have Medicare and Social Security. There’s no way you can avoid these things, but you can ease their impact on your quality of life.
Start A Business
If you have any kind of idea to sell a product or service, this is a golden time to make it a reality. Almost everyone wants to be their own boss and try out some dream that has been at the back of their minds for a long time. There are tons of benefits that come out of starting a business.
First of all, because the world suffered from a pandemic, most people want to help out the businesses that start out right away. You will have a lot more support from the community instead of jumping in and competing against all the major corporations.
Aside from that, this is an opportunity where you can earn more cash. Having a bit more money never hurt anyone. Additionally, this gives you a lot of tax advantages. For example, if you run a daily business, many of your expenses can be deducted from the income, which will reduce the overall obligations. If that sounds good, get ready because there’s more.
One of the best deductions that come out of this scenario is healthcare premiums. Everyone knows that the United States has a significant issue with the healthcare system. At least in this way, you are somewhat more protected. Finally, if you follow all of the IRS guidelines, you can get some home expenses deducted too. This includes phone bills, the Internet, and some other utilities.
Make use of long-term capital gains
If you’re a person who spends most of their time online, you must have seen some of the advertisements on YouTube, Facebook, or Instagram. Usually, the ads are about products, and they want to sell you something that’s new and trendy. Follow this link for more info https://www.accountingtoday.com/list/top-tax-strategies-for-the-end-of-the-year
However, a new trend is coming up with people selling courses, teaching you how to invest. Well, the idea behind that is quite beneficial to everyone. Investing is an excellent opportunity to make more money in the future, as well as to secure some long-term capital gains. The stock market is unpredictable, but you can also invest in assets, properties, and valuable metals.
For example, someone who holds on to an asset for more than a year enjoys preferential tax rates ranging from zero up to twenty percent on the capital gain. On the other hand, if you hold on to the asset for less than a year, then the regular rates come back into play.
If you want to know all of the details and quirks related to this niche, the best thing you can do is talk to an advisor. Don’t fall for the online ads that claim they can make you a hero from zero. Usually, those are people who hired advisors themselves and then share the info they’ve learned. In your case, getting the details from the source would be the best option.
For example, if you live somewhere along the Emerald Coast, you can type financial planning Pensacola and get guided by local experts. It’s much better to have a conversation with a real human being where the setting allows you to ask questions whenever you don’t understand a part from a procedure.
Are there any sources of non-taxable income?
Before we go deeper, you should know that from most of the money you earn, a portion will go to the government. Most states differ in how they handle income taxes, and there are some states where the rates are zero.
However, one of the best ways to ensure you get the most bang for your buck is to invest in life insurance. The money you get from it is non-taxable, plus you get a whole load of benefits. If you’re still in your teens and you’ve only worked for a few summers, it would be great for your future to make a policy.
Let’s say that in a year, you can set aside five grand for an insurance policy. The deal states that you need to pay the same amount for the next 25 years. It’s a long-term investment, and it protects you from many things. If you break a finger, leg, arm, or get a terminal disease, the insurance company will pay for some of the damages.
That’s just one of the benefits. If you finish paying all 25 years of your contract, when the time passes, you would have saved 125,000 dollars for yourself. That money is non-taxable, and you can use it for anything you like. Even if you go into prison, the state has no way of interfering with this policy.
Additionally, when you make the agreement, you need to mention who will be the heir of the money in case something happens to you. In case of an accident, the person closest to you will get the full amount. Another source of non-taxable income is financial gifts. Let’s say your uncle comes over and hasn’t seen you for a while and decides to give you a hundred bucks.
You don’t need to report that to the IRS. All financial gifts up to 15,000 dollars are exempt from taxes. If you’re a married couple, then the number is higher and goes up to 30,000.