If you make a high income, your tax responsibilities could be higher than they need to be right now.
Although some people define “high income” in different ways than others, you generally need to have a household income of at least $400,000 to qualify for this status in the United States.
Your earnings require a customized approach to ensure that you can meet your financial goals. This process starts with proper recordkeeping to get the deductions you deserve.
Once you have the documentation available, here are some of the options you can consider using to reduce your overall liability.
Best Ways to Deal with Taxes and a High Income
1. Defer your income to another year when you don’t expect to earn as much money. This amount can involve any bonuses you wish to receive or other funds.
2. Max out your 401(k) retirement account, a 403(b), or another similar one for which you qualify.
3. Contribute as much as you can to your IRA. Since you’re a high-income household, the Roth IRA rules probably don’t apply to you.
4. You can accelerate your capital losses or defer capital gains.
5. The IRS allows people to gift up to $14,000 each year to individuals through the gift-tax exclusion.
6. If you invest in tax-exempt municipal bonds or Treasury securities, you can limit your tax exposure for the year.
7. Keep track of your mileage for medical, business, and charitable purposes.
8. If you have dental and medical expense deductions, you’ll want to keep the receipts available for those charges. For high-income individuals, the amount must usually exceed 10% of your adjusted gross income.
9. Special deductions are available if you hire your child if you are self-employed.
10. You could take out a home equity loan since the interest on the product is deductible.
Taxes will eventually come your way. With current information and the right planning strategy, you can make it a more affordable experience.