By: Tom Wheelwright
“I know there has to be a better way.”
This was a line in a form submitted to me a couple years ago and it still sticks with me.
The person was inquiring about how my team and I may be able to help this person reduce their taxes. This person shared that they were paying a lot in taxes and that their current tax advisor gave them the following advice:
1. Increase their withholding (so they pay in more taxes throughout the year)
2. Make less money (so they have less money in their pocket at the end of the day)
This is the worst advice I’ve heard and sadly it wasn’t the first time I had heard it – I still hear it at least once a month.
There are so many things wrong with this advice:
When your advisor’s solution is to make less money, you need a new advisor. Your tax advisor should be leading the way with new ideas to reduce your taxes and put more cash in your pocket.
No country has a 100% tax, so making more money still means you are making more – even after taxes.
There is always a way to reduce your taxes, regardless of your situation.
If you want to change your tax, change your facts.
As I like to put it, if you want to change your tax, change your facts.
Your advisor’s role is to tell you what facts need to change and why. Your role is to make those changes happen.
If you are willing to change your facts, there is always a way to legally reduce your taxes.
Here are a couple of examples:
Change your taxpayers, change your tax
There are legal ways to add taxpayers to your tax strategy. With additional taxpayers come additional tax brackets – many of which have a nice set of low tax brackets that you can legally use.
These additional taxpayers could be an entity, your children or other family members.
Of course, you don’t just want to give your income away solely to reduce your taxes. But, there are many situations when it can work with your tax goals, wealth goals and personal goals.
Change your wealth strategy, change your tax
Changing where your income comes from will change your tax. Certain types of income come with tax benefits whereas other types of income come with the highest tax rates.
These are just two examples – both of which can provide huge tax savings and, like I said, these are just two examples.
There is a better way!
The best person to reduce your taxes is you. You are in control of all your facts and that is the key to reducing your taxes.
To do this, you’ll need education and a strategy. A good tax advisor can provide these. With these in place, there is a better way.
Tom’s firm provides my tax advice and wealth planning. I encourage you to check out ProVisionWealth.com