The internet can be a rabbit hole of information, but can you actually lower taxes without being self-employed? A Tampa Accountant tells you how!
Paying taxes is stressful enough, let a Tampa Accountant help you brainstorm lowering them to put more money in your pocket!
The 101's of how you can lower W2 income:
401k Contributions
Traditional IRA Contributions
HSA Contributions
Student Loan Interest
Itemizing vs Taking the Standard
Donor Advised Funds
Harvesting Losses
Investing in Real Estate
Research Credits! (Home Efficiency/Electric Vehicle)
1 - Retirement / HSA Contributions.
The easiest way to save on taxes when you're a W2 Employee, is to research your company's 401K / HSA options to ensure you're maxing those out! Make sure you're maxing out your company's 401K matching as you could lower W2 income by up to $22,500 while keeping your acorns from Uncle Sam! Thinking long term, in lower income earning years, you can even consider converting your 401K (or chunking) it into a mega backdoor Roth IRA so that it grows tax free / withdrawals tax free. Timing is everything with investments and retirement.
Similarly, make sure to max out your company's HSA deduction. This could upwards of $7k/$8k for families and you can invest it in things like money market accounts/stocks (Fidelity is great for this) and you can even use it to invest in Crypto/Real Estate (self-directed option may not be available if HSA is employer sponsored). For most employer sponsored HSA Plans, you won't have too much leverage on investing it but you can still write off the contributions tax free and there are a TON of things you can spend it on as it compounds:
Out of pocket medical (co-pays)
Prescriptions
Heavy Dental bills!
OBGYN's, Birth Costs, Fertility Costs, etc.
If you're super healthy you can even save it, wait, and use it later for long term care.
You can use it to pay for medical supplies (canes, walkers, etc.) for a parent that you claim as a dependent
Etc.
If your employer does NOT offer an HSA, you can always create one through providers like Fidelity / Optum Bank / Health Equity / etc. The only caveat is that you must be enrolled in a high-deductible health insurance plan to qualify for an HSA.
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2 - Itemizing / Other Adjustments.
Whether you itemize or take the standard deduction, every penny is still worth tracking! Here are some things to track to ensure you're maximizing itemizing:
Interest: Mortgage Interest, HELOC interest, 2nd home Interest (if not a rental property)
Taxes: Real estate taxes (or sales tax paid on purchases if your mortgage interest + RE taxes are minimal. Usually sales tax is much higher!), vehicle renewal taxes (car, truck, RV, etc.), 2nd property RE taxes (if not a rental).
Medical Expenses: This one is usually hard to breach since you can only write off expenses that break more than 7.5% of your AGI. I.e. if your W2 is 100k, you must have more than $7,500 out of pocket medical expenses to be able to write any off. This is why an HSA is so valuable!
Charitable Contributions: donating furniture/clothes/household goods, donating money, donating stocks, donating rare items like art/etc.
Other items you can write off that are considered "adjustments" aka items that lower taxable income:
Student loan interest
Educator expense ($300 per person, must be a K-12 employee)
Alimony if decreed before 2018
Moving Expenses (military only)
Traditional IRA Contributions
It's important to know all the options for itemizing / adjustments so you know whether or not something might apply to you and your taxes. Again, every penny counts!
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3 - Other possible write-offs.
A few other niche options for writing off expenses against W2 income are:
Investing in real estate (there are 3 different ways RE losses are viewed. (1) allows you to write off up to $25k, (1) allows you to carry passive losses forward and (1) allows you to be considered a RE Professional so losses are unlimited.
Harvesting losses (i.e. selling some stocks to capitalize on the $3k capital loss that will offset your W2)
Donor Advised Fund (essentially a business like charitable contribution vehicle)
Home efficiency credit(s) (did you get a new water heater / windows / AC system?)
Electric Vehicle credit(s) (could be up to $7,500!)
Were you a student? If under certain income limits, you could get a few hundred to a few thousand dollar credit!
Are you a parent? Paying for childcare could be a credit!
Etc.
This is a very simplified list of ways to reduce W2 income but it's important to note that it is possible to reduce taxes even if you're not self-employed!
To learn more about payroll taxes, click here!
To learn more about sales tax, click here!
To learn more about other FL business taxes, click here!
Received an IRS Letter recently? client here!
Reach out to us to get a free consultation with a Tampa Bookkeeper to address any accounting questions that you may have to make sure you're compliant!
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For over a decade, Taxes Tampa has sought to be a communication-focused Tampa Accounting firm. We don’t operate on a volume-based business model which allows us to check in with our clients more than the average accountant in Tampa and offer our clients a more hands-on and advisory tax experience. We want to ensure you understand the ABCs of LLCs, Taxes, and everything in between. Contact us today for a free tax consultation with one of our Tax Accountants in Tampa!
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