Tax advantages

I take eligible deductions, I don’t pay taxes on investment income not realized, I use a 401k, an IRA, HRA and 529 plans, I offset investment gains with losses, I sold my house using the $500,000 exemption. I deduct donations to charity. I have a tax-free Roth account, I invest in tax-free municipal bond funds and anything else that will legally reduce or defer my taxes and so do you I suspect.

Millions upon millions of Americans take advantage of various tax benefits at the state and federal level that base eligibility on income and not wealth, Obamacare tax credits and frozen property taxes at the state level are two examples.

The amount of money involved may make an easy target, but is irrelevant. What matters is the uniform application of the tax laws and that the provisions support desired behavior, like saving for retirement, more affordable health care, low municipal borrowing costs, investment risk taking, etc.

A billionaire who doesn’t pay taxes on income that has not been realized is more honest than the restaurant worker who underreports tips, the shop owner who only takes cash, the millionaire who pays $10 a month for Obamacare because his income is low or the taxpayer who inflates the value of a charity deduction.

Even I am shocked

6 comments

  1. Depends how how you define rich. 47% of Americans pay no income tax so if you do and take deductions you could be rich.

    Like

  2. Could it be that those tax reduction laws were created to benefit the rich [which includes the rich who make the laws.]

    .

    Like

  3. I’ve always done my own personal taxes, but because of the wife’s profit sharing, twelve years ago started taking them to a local preparer to double check. It was one hundred dollars for peace of mind. By 2019 that had grown to $140. Still worth it, but my preparer closed down due to Covid. We went to one of the big chains, and they wanted over $400.
    With no business income, a worker/retiree/homeowner/ with simple retirement investments, you should be able to “do your taxes on a postcard”.

    If that were possible, how many local preparers and national chains would go out of business? How many private and public workers would be unemployed?

    Excerpt…
    “Tax preparation is BIG business – there were 300k people employed at 109k firms in 2012 – generating $9 billion in revenue in 2012. The industry grew over 2% from 2010-2015, and is expected to speed up the pace of …”

    Like

    1. Tip; if your taxes are simple, buy a program and do your own taxes. H&R Block costed me $37.27 (pre-season). Electronic state taxes cost extra so I have the program print my tax form and then go to the free NJ State tax site and enter the data in. You can also upgrade to have H&R Block review your return and represent you should you get audit for piece of mind. I believe it is in the $75-100 range but I don’t remember because I don’t do it.

      If you are still uncomfortable, go to your accountant without telling him of you computer program print outs. Compare the returns and see if you can save $360+.

      I went to an account in the 1980’s and I was still using paper. The accountant lied better than me and it was just enough to cover his fee over what I would have gotten back away if I filed my paper forms. Never went back.

      I switched from Turbo tax to H&R over costs when after a few years back they dropped something from their Deluxe program forcing an upgrade. But both programs are easy to use. My tax returns should be three lines for income (pension, 401k, bank interest), the standard deduction and tax owned.

      Like

  4. Well said. Whenever I read an article it is useful to consider whether it was the writer’s intent to inform and stimulate constructive discussion, or instead was it to appeal to my emotions like anger and envy. Your comments about the need for examining the tax code are much more useful and constructive. Much of the dividing of Americans today into groups based on race, ethnicity, finances or whatever, as covered by the media would benefit from a similar logical analysis.

    Like

  5. For the last decade or so, my income is such that I take the standard deduction because there is no way I can lie enough to have medical and charitable deductions meet the limits. I do take every veteran exemption that I am allowed. Do I think that I earned them? No, because I am not disabled, but I take them because the laws say that I can and I qualify for the exemptions and deductions. I do take tax break that I am entitled to by law.

    I don’t blame anybody for following the tax law. If their smart lawyers and accounts say they own nothing then they own nothing. I have the knowledge that they had to employed other people to figure that out and those professionals will have to pay income taxes for their advice. The billionaires thus created additional jobs in the process of trying to figure out what they owed in taxes.

    Having to hire other people or using tax programs to figure out your taxes is just wrong. It is too complex and remember who made the tax law that way. The same people who try to buy votes crying it’s not fair and they are going to tax the rich.

    If people want everybody to pay their fair share, cut the tax code down to a few hundred pages, make a flat tax, and stop with all the credits. If the governments want to give away money to encourage good and bad behaviors, then make them fill out a form and mail them a check.

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s