Benjamin Franklin once said that the only things that are certain in life are death and taxes. Since we already discussed estate planning that means it’s time to cover taxes.
Taxes fall into the efficiency and technique equivalent in our financial training plan. This is why today you’re going to learn how to improve your efficiency so that you can pay less taxes over the course of your lifetime. After you finish listening, instead of dreading the thought of income taxes, you’ll feel empowered.
Come spend a mile with me and increase your financial confidence while you are increasing your fitness.
You will want to hear this episode if you are interested in…
- Being efficient in tax planning [3:12]
- Capital gains [4:45]
- An example [6:13]
- How taxes are like efficiency training [9:03]
- Paying fewer taxes over your lifetime [11:22]
- Your homework [14:10]
Improve your understanding of the tax system to mitigate the amount you pay
Since taxes are subjected to the whims of Congress and the IRS, most people think they have no control over their income taxes.
In order to win the tax game you have to have an understanding of the mechanics of how the system works. Since there is no legal way to completely avoid taxation, you can learn to mitigate the taxes you pay and approach taxes strategically. My goal is for you to learn to pay less in income taxes over the course of your lifetime.
How the tax system works
The US has a progressive tax system which means that the higher your income the higher percentage of your income is taxed. Currently, there are seven federal income tax brackets that range from 10-37%.
Capital gains are also a type of tax that is owed when you sell something for more than what it cost to buy it. These taxes are paid on the excess and range from 0-20%. Check out the resources page for a more in-depth tax planning table.
Winning the tax game
Many people think that getting a big refund from the IRS is the best way to “beat” the system. However, this isn’t a win. Getting a refund simply means that you had too much withheld throughout the year. Instead, I define “winning” the tax game as paying the least in taxes possible over your lifetime.
Achieving financial independence is a fantastic goal. However, once you do, taxes will become an integral part of your cash flow plan. You’ll want to have a clear understanding of the tax system to ensure that you lessen your tax burden to pay less over the course of your lifetime.
Listen in to hear an example using Harry and Ginny to discover how to estimate your tax liability so you can calculate your expected income tax projection then you can even break that down to better plan your paycheck withholding.
Resources & People Mentioned
- Episode 23 – Cash Flow Guardrails
- Tax Informational Worksheet
Connect With Justin Waller
- Waller Financial Coaching on Facebook
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- Justin on LinkedIn
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