Do Tax Planning Strategies For High Income Earners Work?

1
Do Tax Planning Strategies For High Income
Earners Work?
2

• There are legitimate way to pay less income tax
  by utilizing simple tax strategies, one of which
  I will describe in this newsletter. Many people
  unknowingly set themselves for a huge taxable
  event by using traditional IRAs.
• The problem with traditional IRAs is that if in
  the event of an emergency where you need to
  withdraw money from it before you retire this
  will be added to your taxable income for the year
  and could move you up into a higher tax bracket.
  The tax planning strategy that can secure
  protection against this type of situation is the
  Roth IRA. This way you insure that there will be
  no big surprises for you at the income tax
  season.

3

• Planning for your retirement?
• High earning employees, need to give sufficient
  thought to your retirement even if it may seem
  like its a long way off. If you have a company
  matched 401(k) or 403(b) you can contribute up to
  18,500 of your gross income every year. The
  money goes completely tax free into the
  retirement plan, since the contributions come
  directly from your pay check before it gets
  taxed. Of course as stated before, if you need
  the money before retirement the tax consequences
  could be substantial.

4

• It couldnt be simpler than a SIMPLE IRA
• A savings incentive match plan for employees
  individual retirement account, more
• commonly known as a SIMPLE IRA, is a great plan
  for businesses with employees that do not wish to
  spend money on a Safe Harbor 401(k) or a regular
  401(k). If youre 50 or above, you have a 15,500
  annual contribution limit, and if youre below
  the age of 50, the limit is at 12,500.

5

• Going solo
• A Solo 401(k) can be set up by high earners that
  are self-employed, for themselves and a
  registered spouse, enabling you to do the same
  annual contributions as a standard 401(k),
  18,500 or up to 24,500 for those aged 50 and
  above.
• Plans for seniors
• If youre older than 40 and have a business with
  a high profit margin, then a defined benefit
  plan might work out well for you.

6

• Its possible to put a significant sum of money
  into such a plan, up to 200,000, especially if
  youre in your 60s and are self-employed.
• What about a Roth conversion?
• Our favourite is the Roth IRA. While you dont
  get a tax deduction when you put money into your
  Roth IRA, it does grow tax-free and should you
  withdraw any money from your IRA, it will be 100
  tax free.
• You are permitted by the IRS to convert your
  existing IRAs to a Roth IRA, and once you do
  that, any future income and growth is tax free
  for you and your

7

• spouse, not to mention future generations, and is
  a permanent tax-free account. Our recommendation
  is that you seriously consider this
• Selling inherited real estate to save money on
  taxes
• This tax reduction strategy is one that is often
  misunderstood by high income earners, but its
  worth taking the time to get it right.
• Inheriting property usually gives you a full step
  up in basis and makes your property tax go up.
  Lets say you inherited a property that was
  bought for 100,000 and at the time of your
  inheritance, it was worth 1 million. If the

8

• property had been sold before it was left to you,
  the owners would have made a 900,000 profit, but
  as you inherited it at 1 million, your cost for
  tax purposes, increases to 1 million.
• Many of those who do inherit property end up
  selling when they begin to fully comprehend the
  step up in basis principle and can take advantage
  of the tax deductions.
• What about donor-advised funds?
• Taking advantage of a donor-advised fund may be
  among the best tax planning

9

• strategies for high income earners, since it
  enables you to take current and future year
  contributions and deduct them all in the current
  year.
• Brokerage firms have a special kind of account
  called a donor-advised fund, and when money is
  added into them, they become charitable tax
  deductions. If you set up one of these accounts
  and put money into it, it doesnt mean that your
  money goes to charity, instead it means that as a
  trustee, you can invest the funds however you see
  fit and make decisions based upon what charities
  receive certain amounts that year, and in years
  to come.

10

• If you were to put 100,000 into a donor-advised
  fund, you would get a full tax deduction when you
  are in the highest bracket, and you simply need
  to give 10,000 of that money to your chosen
  charities each year.
• Putting your money into real estate
• Many high-income tax earners, invest money in
  property, which can be an effective means of
  saving money on taxes.
• If you were to buy a property valued at 1
  million, and allocate the property between land
  and buildings, if the buildings are worth
  750,000 or 75, then

11

• you get to depreciate that over a 27 and a 1/2
  year period, meaning that youd get a 27,000
  depreciation deduction every year.
• If you were to rent the property out to tenants,
  you could take the income raised from that and
  subtract the expenses, then pay zero tax on that
  profit because you get the depreciation
  deduction. This amounts to a tax-free income,
  which can really be beneficial as a tax planning
  strategy for high earners, provided either you or
  your spouse are a real estate professional.
• So, do tax planning strategies for high earners
  really work?
• These are all traditional tax saving strategies
  that are recommended for high

12

• income earners, and they may well work, but what
  if you discovered you werent actually required
  by law pay those taxes at all? I know what you
  are thinking, that is a far fetched idea, but it
  is a reality, and one that many hard-working U.S.
  citizens are not aware of.
• So, heres how it works if youre a high-income
  earner in the private sector and not employed by
  the federal government, then theres a strong
  chance that you have been overpaying on taxes and
  can significantly reduce if not eliminate all
  federal income taxes you are paying!

13

• As hard as it may be to believe, it is
  nevertheless true and all you need do to know to
  discover whether you qualify is to answer a few
  simple questions. There is also the potential
  opportunity that you are owed a refund for the
  two previous tax years, too.
• If youre a high-income earner looking for ways
  to legitimately lower your taxes, then the tried
  and tested methods in this article just might
  work for you. However, if you like the sound of
  stopping your taxes for good and to be frank,
  why wouldnt you? then contact a professional
  tax service company for help and guidance, and
  who knows, this time next year you could be a
  legally non-tax paying citizen!

14

• End Taxes 4 Ever offer professional tax service
  to our clients to ensure they are only paying the
  amount of taxes owed and remaining in full
  compliance with both State and Federal income tax
  laws. Our tax experts have discovered that nearly
  all Americans are not just overpaying on income
  taxes, but in the vast majority of cases they
  lawfully required to very little if anything at
  all. We give tax planning strategies for high
  income earners, guide individuals in how to
  legally stop paying taxes, remain in full
  compliance with the income tax law and get the
  biggest tax refund that the law allows. Get
  answers to your questions like how many years
  back can i get a tax refund? and more by visiting
  our website .