3 Tools To Help You Pay Less Taxes
The 401K Plan
401K plans are a great way to pay less in taxes and keep a little bit more for yourself, and many employers match your contributions, allowing you to essentially automatically double your tax-deferred contributions. With a 401K plan, you can allot a certain amount of money to be put towards your retirement before you pay your taxes, and you’d then be taxed when you start withdrawing your money later in life.
The Roth IRA Account
Roth IRA’s are by far my favorite investment accounts. With a Roth IRA, you can make contributions after you’ve paid your taxes, and the great thing is that your money wil grow tax-free. Meaning, once you retire and start withdrawing money from your retirement account, everything you’ve accumulated will not be taxed. I find that the Roth IRA is a great counter balance to the 401K.
Taxes requirements are always changing. If taxes are raised in the future, you’ll be paying more when you finally withdraw from your 401K, but you can withdraw from your Roth IRA tax-free. If taxes are lowered in the future, you would have paid more in taxes when you initially contributed to your Roth IRA, but you’ll be paying less in taxes withdrawing from your 401K.
Capital Gains
There are different types of many different types of income. Earned income is what you make when you go to work and trade your time for money. Capital Gains is income you make on your investments. If you buy $100 worth of stock $XYZ at $10 per share, and the price of the stock rises to $20 per share. You now have $200 and sell all your shares. The $100 you made would be considered your Capital Gains, and as of right now, if you held that stock for 2 years, you would have to pay 0% in taxes for that $100. These laws are subject to change, but take advantage of this while you can.
Those are just a few things you can do to give less of your money away in the form of taxes. Do some research, find out how much your employer matches on their 401K plan. Look into opening a Roth IRA, and start earning some Capital Gains.
As always, this is not financial advice as I am not a financial advisor. These are just a few tools I personally use to keep more of my hard earned money.
The brokerage, Webull, is a commission-free brokerage that will give you some free stocks to start on your investing journey when you sign up and fund your account using this link: https://act.webull.com/ne/4wM7AjZ5YfWE/trh/inviteUs/
Webull also allows you to open a Roth IRA on their platform to start working on those tax-free gains.
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