How to Reduce or Eliminate Federal Income Taxes Altogether

How to Reduce or Eliminate Taxes

Altogether

2 Unconventional Rules to Eliminate Taxes

Death and Taxes?

Benjamin Franklin said these two were the only certainties in life.

But one blog focused on early retirement has offered up two simple rules to minimize, or eliminate, federal taxes.

What is Go Curry Cracker?

A website run by a husband and wife that saved 70% of their salaries for a decade.

After retiring early in their 30’s, the couple travels the world with their (soon-to-arrive) child.

In an effort not to over-

complicate things, I’ll offer up two very simple rules to reduce your tax burden—both thanks to

Go Curry Cracker.

How to Pay Little or No Taxes

1) Live Well for

LessThere’s no substitute for finding your level of Enough—and ignoring the toxic consumer messages around you.

Your taxes are determined by your income.

The level of income you need to be content is determined by your approach to life.

Those who are aware of their “Enough” have far more financial freedom than those that require continual upgrades on the hedonic treadmill.

Once your “Enough” is established, you can use tax breaks to reduce your tax burden significantly.

Tax Breaks & Deductions

A family of three can earn a lot before ever having to pay taxes.

Consider the case of a married couple with one child in 2015.

Possible Deductions Standard:

$12,600 Exemptions:

$12,000 Child Tax Credit: $1,000 Health Savings Acct: $6,650 Traditional IRAs:

$11,000

Total: $43,250

The less money you need to be happy, the

less you have to work, and the less taxes you’ll owe.

Even if you enjoy what you do—and make more than you need—you can put your leftover money in tax-deductible retirement accounts to reduce your liabilities—or donate to charity.

The Bottom Line

2) Choose Leisure Over

LaborFair or not,

“earned income” has a

heavier tax burden.

One of the most contentious parts of our tax code is how income is taxed.

Your wages and/or salary count as earned income—as opposed to passive income provided by investments.

Earned income generally has higher tax rates than passive income, even though poorer citizens rely on earned income for meeting their needs.

An Example…

• You pay no taxes on long-term capital gains or dividends if you are in the 15% tax bracket (or lower).

• A married couple filing jointly could have total taxable income (including capital gains and dividends as well as wages) of up to $74,900 before they have to start paying capital gains/dividend taxes.

Our hypothetical family could have $43,250 in

wages/salary and pay zero taxes because of all their deductions.

They could also have up to $74,900 in passive income before paying taxes.

Put the Two Together

This family could have

$118,150 in income and pay absolutely no federal taxes.

Hypothetically…

Is This Ethical?

Of Course It Is!

The family doesn’t burden the infrastructure because: It likely drives less, to

hold costs down. Won’t have to rely on

government assistance. Provides a model of

sustainable consumption.

No Way!

The family benefits from: Public Schools Roads Possible health

subsidies Social SecurityAll paid through taxes.

Ethical or not, these moves can help make a comfortable, or early, retirement much more possible.

But what if you’re on the cusp of retirement, and can’t benefit from this advice?

The $60K Social Security Bonus Most Retirees Completely Overlook

Check Out…