Last week, I spoke to small business owners. I showed them how they could build generational wealth using business taxes. As promised, this week, I discuss how individual taxpayers can use taxes to build generational wealth. This is the most vulnerable group of taxpayers. They are vulnerable because most of them do not see the need to itemize their deductions. They ‘jump’ for the standard deduction and leave thousands on the IRS table.
For this reason, the IRS enjoys most of its collected tax revenue from individual taxpayers. Most of this tax is collected through withholding taxes. But we can change these using tax strategies for individual taxpayers.
Why tax strategies for individual taxpayers?
Even though this is the kind of information the IRS would not want you to have, you still deserve it. Why? Tax strategies exist so that we save money and reinvest it back into our lives. All wealthy families do this. They have all kinds of techniques that they use to reduce their tax bills to almost zero.
It is essential to know tax strategies so that you get most of your money back. I am talking about tax refunds. If you implement this well, you will get most of the withholding tax from your salary back.
What tax strategies to use?
Plan your taxes
Tax planning for individuals is also an important subject. It would help if you planned your taxes to get that big tax refund after filing your return. Tax planning is the process of reducing your taxable income. You do it by increasing your itemized deductions and taking advantage of all tax credits you qualify for. When planning taxes, the rule of thumb is to do it throughout the year. You cannot wait until it is tax season to start planning your individual taxes. It will not work. If you need any help with this, contact me today to get started. This is the only way to get a big tax refund.
Plan to stand out
In 2020, the IRS issued about 126 million refunds, making up 74% of all filed returns. I understand that you think this is a huge number – well, it may be, but wait. Judging by the numbers for refunds issued so far in 2021, the average size is $2,893. This is not much, and you surely cannot use it to build generational wealth. You will need more. You will need to plan to go big concerning your tax refund and be like a few individuals who can get as high as $10,000 or $15,000 in tax refunds.
You can do this legally. Talk to me today.
Choose to itemize
Above, I spoke about going big when targeting a tax refund. The best way to do it is to itemize your deductions. Do not be like most people who choose the standard deduction. It only results in meager savings in your taxes.
Everyone has expenses that qualify for deductions, for example, all medical expenses, cash donations, and more. We just do not know about them, or we are afraid of the processes involved. But honestly, the fear of working hard on this process is why you will not build wealth while rich families continue getting more prosperous. Therefore, also choose to itemize your deductions. If you want to know how book a call with me. You will only need 5 minutes with me to understand how to do this right.
Take advantage of tax credits you qualify for
Tax credits are more powerful than the standard deduction because they reduce your tax bill, dollar for dollar. For example, if you owe the IRS $2,000 in taxes, having tax credits of the same amount means that you don’t pay anything towards taxes. Individual taxpayers, too, have a couple of tax credits they can take advantage of. These include the earned income tax credit, the savers tax credit, among many. You surely need to have a conversation with me and increase your chances of paying almost zero taxes and use the saved money to start building wealth.
Take advantage of lower tax rates.
Did you know? You can divert some of your income towards assets with a lower tax rate and save on taxes. You can be a silent investor in a business. Proceeds from that business are favorably taxed. You can also invest in real estate or dividend stocks and save on taxes.
The good thing about this tax strategy for individual taxpayers is that it kills two birds with one stone. The first is on tax savings, and the second is on building generational wealth. As you own dividend stocks, invest in another business or real estate, you are not only saving money on taxes, but you will also be growing your net worth!
The bottom line
After getting the tax refund, your next question will be how to grow the money and build wealth. Well, we all come from different backgrounds and are in various cities and states. That might mean we are exposed to different circumstances that cannot allow for an umbrella solution for building wealth. As such, your first task even before getting the refund money is to determine the best way to grow your money based on where you are, or what you can do.
For example, a business student will one day want to own a business. If they get tax refund money, they can be a silent investor and start watching from a distance how other businesses do while saving on taxes and building wealth. If you live near a previously marginalized area where the government offers tax credits for investing therein, find a business to invest in, earn money while enjoying tax credits.
There is so much that you can do. But you must understand your circumstances first. I will help you with this self-appraisal. Contact my office today and book an appointment. You can be the one to lead your family out of poverty to being a billion-dollar family!
