Psst. These have worked with other Clients — they could work for you, too.
Now that 2020 taxes are filed (unless you have an extension), it’s time to think about legal ways to minimize your tax burden for 2021.
A strategic plan NOW saves you money LATER.
And while we’d need to take a comprehensive look at your individual situation, here are four scenarios that we addressed in 2020 that will work for almost any tax filer.
1. Higher health insurance premiums & lower deductibles are best.
If you are self-employed and your insurance is purchased on the Healthcare Marketplace, it is usually better to have a higher premium over a higher deductible when you know your medical costs are going to be high for that year. The higher your income, the more tax dollars you save.
2. Max out your Healthcare Savings Account (HSA).
If you don’t max out your HSA during the year, you can still make a contribution until April 15. Just like IRA contributions, HSA contributions will usually reduce your tax bill 20-25%. For example, an additional $1,000 contribution could reduce your federal tax bill by approximately $250; an additional $2,500 contribution could reduce your federal tax bill by approximately $625.
3. Work in multiple states during the year?
Move your residency to the state you live/work in the most if the tax rate is lower. This can save huge dollars if done correctly. We saved a client hundreds of thousands of dollars by implementing this strategy. This takes a lot of planning in order to implement–not a strategy you can put in place overnight–so definitely call us for a thorough analysis.
4. Don’t forget to review your state for more tax savings
Most taxpayers spend so much time worrying about their federal taxes, they often forget to review their state taxes. Did you know that in some states (like North Carolina), you receive a tax credit for taxes paid to other countries (even if you have also used the credit at the federal level)? This is missed approximately 60-70% of the time (including many that do this for a living). We have one client whose NC tax liability was reduced from $81K to $5K because of the credit taken for foreign taxes paid! If you have paid foreign taxes directly or even through your investment accounts, we are happy to review your returns and let you know if this was missed.
If you’d like to set up a discovery call, please click the button below to get started! Remember, every situation is different so it’s important to seek tax advice from Lesemann CPAs, Your Trusted Advisor.
J A (Jay) Lesemann Jr CPA CGMA
Lesemann CPAs – Managing Member