Taxes Are Your Biggest Liability
When we refer to something as being a “liability,” we are speaking about owing money to another person or party. They stand in stark contrast to “assets” because assets are things you own that can be used for financial gain. For example, your mortgage is a liability, whereas the money you have in a checking or savings account is an asset.
Ask a few people what their most significant liability is, and most of them will say it is the thing we just mentioned: their mortgage. At Worth Advisors, LLC, we want you to understand two things:
- – Taxes are your most significant liability
- – They do not have to be
Take control of your finances by truly understanding and appreciating both points. Most people assume that the ability to lower tax liability is reserved for wealthy individuals who have access to a team of accountants and attorneys. Tax strategies are for you regardless of your income level, and we want to explain why.
The Basics of Lowering Your Tax Liability
Tax liability and tax due are not synonymous. Your liability is based on your taxable income. Tax due is the money you owe after credits, deductions, and withholdings have been taken out. We needed to highlight that distinction because you must reduce your taxable income to minimize your tax liability.
Doing this is not as complicated as you may assume. For example, you can achieve this by increasing your contributions to your retirement account. These include traditional IRAs and employer plans that allow you to make pre-tax contributions, such as a 401(k) or a 403(b). (Roth IRAs allow you to withdraw money in the future without paying taxes on the funds, which is why they are different from traditional IRAs.) Here are some other examples of ways to lower your tax liability:
- – Sell any stocks that have lost money and claim the loss on your taxes.
- – Make donations to charity, document them, and claim them.
- – Deduct the interest you have paid in student loan debt.
- – Start a Health Savings Account (HSA).
Worth Advisors, LLC
You may understand how to limit your liability, but you still want to know how to put this into practice. Contact the financial advisors at Worth Advisors, LLC, and set up a consultation. Let us learn more about your unique situation and explain your options for successfully lowering your largest liability.
These strategies are not for the gifted or privileged few; they are for you. Allow us to make your money work more efficiently for you.