5 ways to increase your after-tax spendable income – and legacy
Over dinner with friends a few nights back, they expressed concern about how the recent tax law changes increased their federal income taxes. New rules limit the amount of property and state income taxes that can be deducted — and they live in a high-tax state. Other than moving, there’s not a lot they can do — or so they thought.
Like most taxpayers, I am a fan of legally minimizing your income taxes. But I think — if you are retired or about to retire — you should concentrate less on minimizing taxes and more about increasing after-tax spendable income and your financial legacy to heirs. Sounds like a non-sequitur, but it isn’t.
As an example, you could invest your entire savings in high-quality intermediate-term municipal bonds and pay no taxes on interest earnings. But you would earn something like 2.5% (or $25,000 on $1 million in bonds) in annual income. Wouldn’t it be an improvement if you paid some taxes and generated an income stream equal to, say, 6% after taxes?
Where do you learn about tax strategies?
Most people either rely on their accountant or tax reporting service to prepare their taxes. Very few have looked at individual schedules, such as the schedule used for calculating your tax shown in line 11a of IRS Form 1040. This schedule has 27 (count ’em) steps in the worksheet, addressing in particular qualified dividends and realized capital gains.
Read the complete May 16, 2019 post from Kiplinger.com here. Or, reach out to a Dugan & Lopatka professional at email@example.com or (630) 665-4440 on ways to increase your after-tax spendable income.