How to Pay Less Taxes to The IRS | Accountant Explains

in today's video I will teach you how to pay less taxes so this video is not for billionaires it's not meant for multi-millionaires no I made this video for the 99% of Americans so I want you to it's very simple what I'm trying to achieve I want you to keep more of your hard-earned money less money for the IRS more for you that is the purpose of this video so here are the actions that you can take by December 31st the first one that I want to start off with is the0 % tax rates on long-term Investments so this is not a myth this exists and I want to clarify this for you if you buy and hold a stock or crypto for longer than one year and then you sell it for a gain it will be 100% taxfree if you are single and you make about $60,000 a year or less head of household and you make about $80,000 a year or less married filing jointly and make about $120,000 a year combined or less I want you to keep in mind that those are the income thresholds at the time of making this video that includes the standard deduction and I just want you to know that every year this gets adjusted for inflation so if you're watching this in a subsequent year then those numbers those figures are probably a little bit higher okay so this is called the 0% long-term capital gains and a lot of people don't know about this even though this is a huge tax break where you pay 0% we're talking taxfree if you're normal in this income range then please take advantage of long-term Investments this is a no-brainer so listen I personally have a lot of friends and family members that make more money than this but if they have a year where their commissions are not as good as they normally are or if they work less or for whatever reason I always tell them to take advantage of the situation this is a good opportunity to lock in long-term capital gains by December 31st and have it taxfree please note and this is very important that your long-term capital gains will be taxfree for your federal income taxes with the IRS this does not apply to your state income taxes but it's still a great deal because state income tax is less than federal income taxes and best case scenario is that some states do not have an income tax so please look into this keep this in mind for future years as well and remember do this by December 31st number two is tax loss harvesting if you have money in the stock market then you need to know about this if you bought a stock and the stock goes up or down regardless it doesn't matter nothing happens for tax purposes until you sell the stock so in other words a tax consequence is only triggered when you sell the stock this means that you can manipulate the situation for tax purposes you can control the timing of of when you claim the gain or loss for tax purposes so that is a lot of power in your hands and with great power comes great responsibility so I want you to be responsible and get this right so that you can optimize your tax outcome if you bought a stock and you're up on the position then you should consider selling that stock after December 31st so that you will not have to worry about the tax consequences for another 12 months so basically push it off until next year this is where procrastination works in your favor unless you have reason to believe that your stock is going to crash and burn by December 31st in that case well don't hold on to your stock until next year sell your stock right now Take the Money and Run take your profits and run now if you bought a stock and you're down on the position you could sell the stock by December 31st to claim the loss as a tax right off so for tax purposes your losses in the stock market are valuable because they reduce your taxable income and you pay less taxes so this is a common tax strategy that investors take advantage of typically in December this is called tax loss harvesting but please note this because I have to give you this warning if you sell your losers now to get the tax right off do not repurchase the same stock within 30 days if you do then you cannot claim the loss as a tax write off it's called The Wash sale Rule now let me give you an example to clarify let's say that you sold a stock on December 28th of 2023 and you lost $11,000 you can claim a $11,000 tax deduction on your tax return and you will pay less taxes but if you repurchase the same stock on January 3rd of 2024 just a few days later then you you cannot claim the tax deduction for tax year 2023 because you repurchase the same stock within 30 days so please watch out for that trap for that rule but please take advantage of tax loss harvesting by December 31st number three Roth conversions I personally believe that Roth retirement accounts are one of the best tax advantage accounts arguably the best because they have significant advantages all the money that you make in a Roth retirement accounts will not be taxable so how awesome is that you will never pay taxes on money that you make in a Roth retirement accounts ever again so that's a pretty sweet deal but here's the thing if you want to put money into a Roth retirement accounts like a Roth IRA or a Roth 401k then you can do that taxfree so in other words you do not pay taxes to put money directly into your accounts however when you're trying to move money from a regular retirement accounts into a Roth retirement account that's a different story for example if you're trying to get money from your 401k to your Roth IRA that is a taxable transaction but some people love Roth retirement accounts so much that they're willing to pay the price they're willing to transfer money from a regular retirement account to a Roth retirement accounts and pay the tax that's because they pay the tax tax now but they'll never pay taxes on all the money that they make in their Roth retirement accounts ever again but that price to pay is a big burden when your tax rate is 24% or 32% but if you are in a lower tax bracket this year now is the time to do the transaction take advantage of the situation this is your opportunity to seize the moment and you have until December 31st to do so what I'm ultim Ely saying is that if you're in the 12% tax bracket or the 10% tax brackets and especially if you can do this taxfree in the 0% tax brackets you should consider converting your money from your pre-tax retirement account to an after tax account and this is called a Roth conversion number four 529 plan you can put money into your 529 Plan by December 31st to reap the benefits on your upcoming tax return so you you can think of a 529 plan like a retirement plan that is designed for future education expenses and it's good to do it in a 529 plan because you get big tax advantages most people set up a 529 plan for their children but it doesn't have to be for your child it could be for your grandchild your niece your brother it could be for yourself so true story I have to tell you this one I had this client and he was doing his MBA at the University of Chicago and he put money into his 529 plan and then immediately took that money and paid his tuition and by doing that he would save $500 in state income taxes so I have to hand it to him he's a smart guy you know working the system like that so if you didn't know here are the benefits of a 529 plan you put money into a 529 plan you decide how to invest that money in the plan and it grows taxfree and if you use the money for qualified education expenses like college tuition then all the gains within the accounts are taxfree now I want to clarify the details each state has its own 529 plan if you create a 529 plan in Illinois for your child it does not mean that your child must go to a college or university in Illinois your child can go to any state and use that 529 money taxfree if your child does not go to college then you can switch the beneficiary of the plan to another child to your nephew to your grandchild Etc another important thing that I must clarify is this and this is pretty bad okay so when you put money into 529 plan you do not get a tax deduction with the IRS for federal income taxes but Most states will give you a tax deduction on your state income taxes however some states do not have an income tax such as Texas or Florida but if that's your case you still benefit from the tax-free growth in the compounding and then there are some states such as California that do not give a tax deduction for $ 529 contribution so that's sad you know that's at the time of making this video but hopefully they change that anyways don't forget about the 529 plan and funding it by December 31st number five is HSA contributions so please do not forget about your HSA contribution especially if you are self-employed so for this one you have until April 15th to make your contribution and get the tax deduction and HSA is a health savings account it's a tax advantage account to pay for qualified medical expenses and HSA is awesome because you get to use pre-tax money to pay for your medical expenses Additionally the money in your HSA account grows tax-free your HSA does not expire and the money within the account does not have a use it or lose it feature but you know what I'm not your doctor so I'll leave it at that and let's move on to number six which is timing your expenses if you're a gig worker independent contractor s proprietor or business owner then listen up especially if you're an Uber driver or door Dasher I'm talking to you if you're running a side gig then here's your chance to shine get your expenses in by December 31st but listen I am not telling you to spend money unnecessarily please don't do that please do not waste money but if you're going to pay for an expense in January you might as well do it by December 31st so that you can claim the tax write off for this year so you're going to come out ahead because the time value of money so here's how it works if you buy something online or at the store with a credit card the IRS will go by the transaction dates not by the post dates so if you make the purchase by December 31st then you can get the tax write off this year on your upcoming tax return so it doesn't matter if you buy something on December 31st and the transaction posts on let's just say January 3rd it still counts as December 31st so it doesn't matter if you pay your credit card bill in January it goes by the transaction date it's the same concept if you're paying for a business related expense by check so less people use checks nowadays but you'd be surprised anyways it's the same rules it goes by when the check is out of your hands so if you're writing a check it goes by when you drop it off in the mailbox or when it's out of your hands so it doesn't matter when they cash your check so if you have to buy Electronics buy supplies pay a contractor prepay expenses could be rent utilities whatnot get it done by December 31st and get the tax right off now it's better that you claim to tax deduction this year instead of waiting around for your tax deduction 12 months later take the benefit now not later so this is all under the assumption that you will be in the same or similar tax bracket from one year to the next number seven is your FSA don't forget about your flexible spending accounts so this is the worst way to waste money a flexible spending account is a type of plan where you can pay for certain expenses with pre-tax money so this this includes child care dependent care and medical expenses and most commonly so the bad thing is that FSA plans are use it or lose it so if you put money into the account but you don't spend it you lose it which is a nice way to burn money however check with your employer to see if they have a grace period if not get your last minute expenses in number eight is your traditional IRA so this is a friendly reminder that you have until April 15th to get your traditional IRA contribution in so this one is not December 31st a traditional IRA is a retirement plan that you have outside of your work so just so you know you can put money into a 401k and a traditional IRA you get a tax deduction for putting money into a traditional IRA but under certain income and plan limitations you may not qualify for a tax deduction please note that these are some of the many options that are available to you to lower your taxes for most of these you need to take action by December 31st if you miss that crucial deadline then you'll get the tax benefits next year rather than this year which is fine but it's better if you get the tax benefits now rather than later I want to end by telling you this this channel is a great resource for your personal financial education and I want to see you become very successful so please subscribe I thank you for the support and I wish you a very nice day take care here

Channel: ClearValue Tax

Views: 450,069

Keywords: tax deductions, tax write off, tax writeoff, tax writeoffs, tax write-off, tax write-offs, irs, Pay less taxes, Tax refund, Maximize tax refund, How to pay less tax, How to avoid taxes, Last minute tax deductions, Last minute tax write offs, Last minute tax writeoffs, Minimize taxes, Pay less tax, how to pay less taxes, how to pay less tax, how to lower your taxes, how to minimize your taxes, tax reduction, tax minimization, tax credits, taxes 2024, taxes 2023

Id: qde9S3Frdo8

Length: 14min 29sec (869 seconds)

Published: Mon Dec 18 2023