It’s the beginning of October 2024 and seven months away for April 15, 2025 so why does that matter now? October has everything to do with saving money and tax planning. It’s is the month when tax professionals, Certified Public Accountants and advisors start planning for the next tax season. You wonder why you may pay more in taxes each year or perhaps why your refund is not greater? Many of us do not think like high net worth individuals. Here’s how rich people think about money.
Background:
According to a ProPublica Report in 2011 Jeff Bezos founder and multi-billionaire owner of Amazon paid nothing in federal income taxes. In 2018, Elon Musk, one of the wealthiest men in the world, paid zero in federal income tax. Based upon these realities, we can easily dismiss the idea that everyone pays their fair share of taxes. That is simply not true! What separates them from the rest of us is their financial mindset and thinking about money.
Wealthy people think of taxes all year round and not just in the spring of each year when April 15 comes around. Tax planning is part of their daily life so the approach is different when it comes to making financial decisions. They think about the tax implications or consequences of financial decisions before making their move. What I am saying to you is that tax consequences are not an afterthought. For example, before you relocate have you considered not just the state taxes but the local and county taxes in your new location?
Transaction Timing:
Wealthy people pay attention to timing when executing and making financial decisions. While most people are organizing their finances and pulling documents together around when the IRS accepts filings and deadlines; wealthy people start assessing and evaluating their tax plan in October or months before the end of the calendar year. What is clear is that they will delay receiving income, purchasing or not purchasing certain items. In some instances they will sell an investment at a loss and then harvest the loss to use against some gains, bonus or extra money they may receive in that year.
The myth and misconception for middle class individuals is that they believe you need to have money in order employ or execute these strategies. You don’t not need to be wealthy to achieve these successful outcomes. What is needed is to begin your tax planning in October or November to get the best economic results.
Free Money Tax Credits, Deductions and Donations:
The average taxpayer does not view tax credits and deductions and free money and use it to their advantage. What usually happens is that most taxpayers do not become aware of tax credits and deductions until they get ready to prepare their taxes in April. Well if you had the ability to receive free money, why would you wait until April or several months later to find out you could have gotten some free money? For example, if you are in the market for a new vehicle, do you know the tax credits available? Rich people know that if they purchase an airplane they can claim the credits or deductions on such luxury items depending on how it is used. In short, rich people will attempt to use or claim a deduction or tax credit for items in order to reduce or pay little or no taxes.
There are advantages available in making charitable contributions in alignment with your receipt of additional income. Donor advised funds allow you to make the donation, and take the deduction. You can then decide which organization actually receives the money later. The point here is that you can decide who gets what, after you have lowered your tax liability.
THAT’S WHAT’S UP!
Today’s What’s Up is about the Federal Reserve (Feds) and lowering interest rates. Now that the Feds have lowered the interest rate, one of the best things you can do for yourself is to work on improving your credit score. Simply put, lower interest rates and improved credit scores will result in you being able to purchase more. And that’s what’s up!
Ruthven R. Phillip, Esq., is a tax attorney, Stewardship and Philanthropy Ministry Assistant, and CEO of Give2Getrich, LLC. Give2Get Rich, LLC 2024. All Rights Reserved. Any distribution or reproduction of part or all of the contents in any form is prohibited.
