- Invest in a traditional company retirement plan. This may be a 401K, a TSP, a 403b, a 457, or maybe an individual 401K or SEP. The more money you put into your future retirement fund, the bigger the tax deduction will be today.
- Review IRS tax form 1040. Educate yourself on what deductions (good) are available and definitely understand what credits (great) are available. Focus on understanding what options you have and the difference between a refundable credit and one that is not.
- Increase your passive income. This usually involves your money making money (you save and invest, and then your money earns interest, dividends, capital gains and rent). This money will generally be taxed at a lower rate and you will not pay FICA tax on this income.
- Buy fewer vehicles. Buy less expensive vehicles. In most cases, you will pay a fee (another word for a tax) that will run into the hundreds, and usually thousands, when you register your new vehicle for the first time.
- Drive fewer miles. The federal gas tax (18.4 cents per gallon), combined with your state gas tax, will be reduced by eliminating some of your trips as you become more mindful of each mile.
- Eat out less often. You WILL NOT pay the state and city sales tax when you eat at home in most cases. Do you know what the sales tax rate is in your area? 7% or higher is normal. You can avoid that tax by taking a trip to the grocery store instead.
- Buy less house. Buy less expensive home. You will pay much lower property taxes when you avoid the McMansion. Besides, who needs the hassle of paying thousands of dollars for space you don’t actually need.
- Buy and hold your investments. Long-term capital gains (investments held more than one year) are taxed at a lower rate than short-term capital gains (investments held one year or less). See the current capital gain tax rates by clicking here.
- Buying and selling investments will increase your taxes. Avoid this manic behavior by getting control of your emotions and possibly greed. Buy and hold your investments over long periods of time. DO NOT try to get in and out by timing the market. It doesn't work!
Take responsibility for the taxes you pay or suffer the consequences of paying higher taxes. It comes down to education and ACTION. Take control of the situation!