5 ms·

What are some deductions that many of us would be missing? I fill out my taxes and I never have enough deductions to itemize.

yieldcrv 3y ago
there is very little that a W-2 employee can do if thats the only thing they do, aside from depreciating real estate and mortgage interest if your goal is to earn and park money in a bank account, the government is trying to tell you to do literally anything else by taxing that the heaviest. their aggregate goal is for velocity within the economy because that is more useful for the government than its tax revenue, and so that is rewarded. so its not really useful for me to write tax deductions that likely don't apply to you
- rurp 3y ago
  Your earlier post would have been more helpful if you'd specified that you're only talking about a tiny minority of the working population. "Lower your agi" sounds like you're making a general recommendation.
  - yieldcrv 3y ago
    it is a general recommendation as the observation is that if more of the population educated themselves in this field and structured their life accordingly, more of the population could have the same flexibility in lowering their agi at their discretion right now, it is a tiny minority of the working population that does anything preemptively for tax purposes, it doesn't have to be that way.
- bombcar 3y ago
  In pursuit, they can go to the 1040 schedule 1 and read it: https://www.irs.gov/pub/irs-pdf/i1040gi.pdf https://www.irs.gov/pub/irs-pdf/i1040gi.pdf - specifically look at lines 11-23, 25: https://www.irs.gov/pub/irs-pdf/f1040s1.pdf https://www.irs.gov/pub/irs-pdf/f1040s1.pdf "Normies" can probably take advantage of 20 pretty easily, if you don't already. The "normal" way to adjust AGI down is to be a business and just not pay yourself as much and cycle everything back into the business. But, remember, the goal is to maximize after-tax gains/revenue, not minimize taxes. You can minimize taxes by minimizing income!
  - yieldcrv 3y ago
    > But, remember, the goal is to maximize after-tax gains/revenue, not minimize taxes. yep. most of the things I like to do will satisfy that. people generally don't understand that the IRS is not this adversary that's waiting to be offended because they didn't get anything, when a lot of offices of the IRS basically helps you not pay them. Have to know how it functions and that requires education.
seadan83 3y ago
A CPA friend of mine stated that software engineers are pretty screwed when it comes to taxes, they pay the highest effective rate. In effect, when you are in the $125k to $250k ballpark, you're at a high tax bracket but not making enough to take advantage of the things that allow (for example) Warren Buffet to have an effective tax rate of 11% [1]. So, in the shoes of a typical software engineer, their effective tax rate is ballpark 30~35% and their deductions are pretty minimal. One example my CPA friend gave was landlords getting it good. They can both deduct depreciation and also repair costs - double dipping! Further, any interest on real estate loans they have are also tax deductible. I don't know of more specifics personally, the impression my friend gave me was that those examples are just the beginning. [1] https://www.forbes.com/sites/janetnovack/2011/10/12/warren-buffets-effective-federal-income-tax-rate-is-just-11/?sh=5442011c454d https://www.forbes.com/sites/janetnovack/2011/10/12/warren-b...
- yieldcrv 3y ago
  correction: W-2 software engineers that don’t do anything else are pretty screwed 1099 software engineers have some of the best tax deductions, and that earnings range is the sweet spot one of my favorite things to do is contribute $66,000 to a 401k for that tax deduction (thats how high the employer match limit really is), immediately borrow $50,000 from the 401k and donate that same money to a donor advised fund for a charitable donation. $116,000 tax deduction before looking at actual expenses. its not advice, its one of my favorite things to do, you have to pay back the 401k over time off $265,000 in earnings (number chosen because thats the minimum to max out a self directed 401k) the AGI would be $199,000 and the MAGI would be $149,000. keep going and get it as low as possible. I would typically try to do a FMV charitable deduction from my existing portfolio. Combined cash+asset charitable deductions can lower that year’s earnings by 60%. if you achieve that the government is only looking for taxes on $106,000 and again this is before you look for expenses. But if there are pre-existing externalities like a mortgage and home depreciation, then you’re pushing your AGI (and subsequently MAGI) down further and further. you can get to Warren Buffett %’s pretty easily even without having long term capital gains tax treatment.
  - coldpie 3y ago

yieldcrv 3y ago

there is very little that a W-2 employee can do if thats the only thing they do, aside from depreciating real estate and mortgage interest if your goal is to earn and park money in a bank account, the government is trying to tell you to do literally anything else by taxing that the heaviest. their aggregate goal is for velocity within the economy because that is more useful for the government than its tax revenue, and so that is rewarded. so its not really useful for me to write tax deductions that likely don't apply to you

rurp 3y ago
Your earlier post would have been more helpful if you'd specified that you're only talking about a tiny minority of the working population. "Lower your agi" sounds like you're making a general recommendation.
- yieldcrv 3y ago
  it is a general recommendation as the observation is that if more of the population educated themselves in this field and structured their life accordingly, more of the population could have the same flexibility in lowering their agi at their discretion right now, it is a tiny minority of the working population that does anything preemptively for tax purposes, it doesn't have to be that way.
bombcar 3y ago
In pursuit, they can go to the 1040 schedule 1 and read it: https://www.irs.gov/pub/irs-pdf/i1040gi.pdf https://www.irs.gov/pub/irs-pdf/i1040gi.pdf - specifically look at lines 11-23, 25: https://www.irs.gov/pub/irs-pdf/f1040s1.pdf https://www.irs.gov/pub/irs-pdf/f1040s1.pdf "Normies" can probably take advantage of 20 pretty easily, if you don't already. The "normal" way to adjust AGI down is to be a business and just not pay yourself as much and cycle everything back into the business. But, remember, the goal is to maximize after-tax gains/revenue, not minimize taxes. You can minimize taxes by minimizing income!
- yieldcrv 3y ago
  > But, remember, the goal is to maximize after-tax gains/revenue, not minimize taxes. yep. most of the things I like to do will satisfy that. people generally don't understand that the IRS is not this adversary that's waiting to be offended because they didn't get anything, when a lot of offices of the IRS basically helps you not pay them. Have to know how it functions and that requires education.

seadan83 3y ago

A CPA friend of mine stated that software engineers are pretty screwed when it comes to taxes, they pay the highest effective rate. In effect, when you are in the $125k to $250k ballpark, you're at a high tax bracket but not making enough to take advantage of the things that allow (for example) Warren Buffet to have an effective tax rate of 11% [1]. So, in the shoes of a typical software engineer, their effective tax rate is ballpark 30~35% and their deductions are pretty minimal. One example my CPA friend gave was landlords getting it good. They can both deduct depreciation and also repair costs - double dipping! Further, any interest on real estate loans they have are also tax deductible. I don't know of more specifics personally, the impression my friend gave me was that those examples are just the beginning. [1] https://www.forbes.com/sites/janetnovack/2011/10/12/warren-buffets-effective-federal-income-tax-rate-is-just-11/?sh=5442011c454d https://www.forbes.com/sites/janetnovack/2011/10/12/warren-b...

yieldcrv 3y ago
correction: W-2 software engineers that don’t do anything else are pretty screwed 1099 software engineers have some of the best tax deductions, and that earnings range is the sweet spot one of my favorite things to do is contribute $66,000 to a 401k for that tax deduction (thats how high the employer match limit really is), immediately borrow $50,000 from the 401k and donate that same money to a donor advised fund for a charitable donation. $116,000 tax deduction before looking at actual expenses. its not advice, its one of my favorite things to do, you have to pay back the 401k over time off $265,000 in earnings (number chosen because thats the minimum to max out a self directed 401k) the AGI would be $199,000 and the MAGI would be $149,000. keep going and get it as low as possible. I would typically try to do a FMV charitable deduction from my existing portfolio. Combined cash+asset charitable deductions can lower that year’s earnings by 60%. if you achieve that the government is only looking for taxes on $106,000 and again this is before you look for expenses. But if there are pre-existing externalities like a mortgage and home depreciation, then you’re pushing your AGI (and subsequently MAGI) down further and further. you can get to Warren Buffett %’s pretty easily even without having long term capital gains tax treatment.
- coldpie 3y ago