What is the best way to cut taxes for single guy who makes a six figure income?

Question

I contribute 20% to 401K at this time, are there any other ways to reduce my tax burden short of having more kids or getting married... Been there done that..

Answer 1

Try getting an accountant, and ask him! :)

Answer 2

It sounds like you've covered the obvious bases to reduce your tax. I'm sure you're aware that there are other investments like municipal bonds that would pull some of the interest income off of the federal return. You could consider buying some annuities. The money will grow within the annuity tax free until it's time to cash them out, presumably when you're retired. Another possibility, depending on your age and tolerance for risk (and some work) is low income rental property. You can actually have positive cash flow but a deductible loss on the property (usually through depreciation or federal tax credits).

On the more altruistic side of things, you could increase your charitable contributions, and that might help reduce your taxable income and give you a warm fuzzy feeling inside.

BTW, I don't think getting married or having kids does much to reduce your taxes, but they both certainly do reduce your after tax disposable income! ;)

Answer 3

Take a look at Sch. A of the 1040, before the end of the year, look over the deductions and see what you have. Do you have property taxes and mortgage interest? Do you have unreimbursed business expenses for Form 2106. Increase your charitable contributions to get yourself over the standard deduction. If you have a lot of capital gains from stock sales, donate some stock to charities and escape tax on the gain. Enlisted the help of a CPA. If you meet the limit you can even deduct the fees charged by the CPA.

Answer 4

I don't know how you are contributing that much to a 401k when the max is 15% unless you are including your company match or you have a self directed 401k.

If you are self employed, consider the self directed 401k. You can put up to $40,000 pre tax into it. If you need more money put away tax deferred to reduce your current taxes, there are DB plans where you can sock away over $100,000 per year.

If you need any more info , email me.

Answer 5

THE ONLY WAY TO REDUCE YOUR TAX BURDEN IS TO LEARN HOW TO GET OUT OF TAXES ALL TOGETHER IF YOU ARE REALLY MAKEIN A 6 DIGIT INCOME WHY HAVE YOU NOT DONE THIS ALL READY.

WTF DUDE

http://familyguardian.tax-tactics.com/Subjects/Freedom/Articles/PhilosophyOfLiberty-english.swf

Answer 6

When you file at the beginning of the year, claim 0, or if you have kids, claim 1 for each, but exclude claiming yourself until you file at the end of the year. They will take more out each paycheck, but you will get more back at the end of the year, if not more. Also, do a little donating and save your reciepts for tax time, one more thing, go with the long form to find more loopholes.

Answer 7

These are the ways to decrease your current tax liability:

+ defer income (e.g. pre-tax 401(k) contributions)
+ pay expenses with pre-tax dollars (HMO, dental insurance, medical and dependent care flexible spending accounts, etc.)
+ choose investments that are tax free (muni bonds, Roth IRAs) or tax deferred (IRAs, annuities, cap gains on stocks, etc.)
+ maximize your deductions (charities, mortgage interest, real estate taxes, etc.)

Go to irs.gov and get the instructions for last year's 1040 (long form) and read through the deductions.

I disagree with metrobluequeen1. She (or he?) is confusing your tax liability with the amount of your tax payment or tax refund when you file. Being overwithheld, as she suggests, is merely making an interest-free loan to the government and does not reduce your taxes.

Answer 8

I agree with littletrisa and frugernity, but I do need to note that unless you are over 50, you can only contribute $16,000 to a 401(k). If over 50 you can add $5,000 in catch-up contribution, but if you are at six figures you will need to adjust that percentage. Your HR department should have caught that.

Answer 9

also start an IRA if you are eligible.....talk to the payroll or human resources people at your job about setting up a Health Savings Account (HSA) with this you put away pre-tax dollars to use for medical expenses, and the amount contributed lowers your taxable gross income.

and, of course, consult a CPA in your area, as they will be more familiar with any additional options in your state

Answer 10

20% to 401(k)? Try buying some a home. Get the interest deduction, real estate tax deduction and a great investment. With the r.e. market down, you should be able to get a great buy.

Answer 11

I would suggest investing in rental property or perhaps dabble in a side business.