Good Financial Reads: Tax Planning for Beginners (Part Two)

Tax planning should be a priority year-round, but many of us scramble at year-end.  This year includes unique tax planning opportunities afforded by the 2020 Coronavirus Aid, Relief, and Economic Security Act (CARES Act), especially if you are temporarily in a lower tax bracket. The following are some tax opportunities you may be able to utilize.

Charitable Giving has been on the minds of many this year. 

After guiding hundreds of people through George Kinder’s 3 Questions, I can say with certainty that, when it comes down to it, most people want to leave this world a better place than they left it. 

What’s important?

• Experiencing the world  - through travel, food and quality time - often with family and friends
• Being generous to family and friends as well as towards one’s community
• Raising kind, thoughtful human beings
• Leaving a unique impact upon the world

If you intend to raise a family and work in the US, childcare becomes essential. This is the only way to juggle commitments without stretching yourself to breaking point, especially considering that you may risk losing certain hard-won social security benefits if one parent chooses to stay home.

No one enjoys paying money to the state or the IRS. When they’ve already withheld and then they find they owe a balance still.

On top of that, adding insult to injury, there is also underpayment penalties and interest.

Let’s talk through some examples so that you know now whether it is the end of the year and you can make a tax payment or you are at the beginning of the year and you can adjust your withholdings and adjust for what you want.

On the surface, taxes seem to be one of those things in life that we just can not control and have learned to accept. As Ben Franklin famously coined, “nothing in this world can be said to be certain, except death and taxes”. 

In reality, optimizing your tax situation is one of the more controllable things in your financial life. We have a set of rules (tax law) that we need to follow and it is our responsibility to operate within those rules and pay our fair share of the pot (and nothing more). 

It is common for people to think that housing is the highest cost item in their budget. However, while it is for some, as your success and income grow, the amount you pay in taxes will begin to catch up and quickly surpass your housing as your highest expense. If you factor in all of the taxes you pay, you will probably realize that taxes are already your greatest expense.