how to pay less taxes
It is quite common to see some doctors, attorneys, engineers, architects, and CPAs making high income. It is great that they are good at what they do and their excellent technical skills and job performance at work make them stand out among their peers and help them make bigger bucks than others. The high income that they earn with hard work, however, put them into higher tax buckets and make them pay more taxes because of one thing - they belong to the E group, that is employees. As employees, they receive W-2 income. If they have an employer-sponsored 401(k), a mortgage, and a family, other than exemptions, mortgage interest, property tax, and pre-tax contributions they make into the 401(k) plan, there is nothing else they can deduct or leverage to reduce or defer their income tax. When those clients ask me to help them save taxes, sadly but truly, I have to turn them down.
Instead, I encourage them to get themselves educated on taxes and increase their financial intelligence. Like I mentioned in “The Art of Taxes", learning about taxes is probably the best tool and asset you should invest in to help yourself save/earn more money. Again, like I said earlier, I am building this blog to help those who are open, curious, have a life-learning mindset, especially my fellow entrepreneurs, explore taxes, increase tax literacy, and understand tax concepts that lead to tax savings and efficiency. I am with you on this exciting journey. But at the end of the day, it is you yourself who make the decision what to invest time, your most valuable asset, in.
To give you a quick start, if you wish to reduce your tax burden, you should alter your circumstances. For example, a client of mine, who used to be a successful IT engineer, in pursuit of his ultimate passion, changed his career from IT to photography. In doing so, he started his own business and built up his own clientele. After many years since then, his effective tax rate has now dropped significantly for one single reason - His type of income changed from W-2 to business income. Behind the scene, it is because he gets to deduct more business expenses once he started making business income through his LLC. To add more, he gets to pay less social security tax and Medicare tax by taking my advice to file an S election (S Election) for his LLC. To dig deeper, he leveraged me to set up his solo 401(k) (Retirement Planning) which enables him to make higher contributions as both an employee and an employer and thus defer more taxes than a regular 401(k) does. In contrary, what do W-2 earners get? Nothing but the old and ordinary.
Yes, the government is biased to employees in terms of taxes. But it is you yourself who decides what type of person you want to be. Your power of choice triggers your vision, shapes your value, transforms your character, and creates your behavior pattern. With every step you take and every effort you make, you will eventually become who you think you are and enjoy building your wealth in a tax-efficient manner.
Despite facing numerous challenges as a single mom, I always dreamed of having my own business. One day, as I watched my children laugh and play in the park, I felt an overwhelming sense of gratitude. I knew my decision to become an entrepreneur was one of the best choices I had ever made. Now I am not only on my way to financial freedom, but also living a life on my own terms, and cherishing every moment spent with my beloved children.
If a single parent like me can start her own business in the midst of multiple challenges, why are you still wasting your time, talent, and skillsets complaining about the amount of taxes you pay? Think about the amount of flexibility and freedom you can get for yourself and your family, and a variety of tax deductions you can take (make sure they are business-related), why don’t you start with something small or part-time, and let the time prove to you that if you stay on this road, it will lead you somewhere amazing. I hope the little seed that I have planted in you will awaken a dream you have had. Good luck!