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Reduce Taxes
NATIONAL TAX FREE DAY?
No, it's not the day you die - you or rather your
estate may pay more taxes on that day than you've ever paid before. Actually,
National Tax Freedom Day is a financial planning concept to help you understand
the impact taxes can have on your paycheck. It represents the day when the
average American has met all income tax obligations for the current year.
The specific date is determined after all income taxes (federal, state, and local),
are filed for the year. Hence, the 2009 date cannot be computed until late this year.
TAX FREEDOM DAY FOR 2008 WAS APRIL 23
Therefore, the first 125 days of 2008, every cent of your paycheck went to
the tax collector! Were there some things you needed in 2008 which you did
without? Wouldn't it have been nice to use some of those tax dollars for items
you had to do without? Think about it; for more than 1/3rd of the year you
donated your labor to the government. Compare this to 1929's Tax Freedom day of
February 9th, when only 40 days of your work went to the tax collector.
Back in 1929, you could put your money in a bank and receive over 5% on your
money, inflation was .6% and the top tax rate was 24%. You could actually make
money by putting it in the bank. Last year, you received .90% on a savings
account, inflation by October 2008 was at 4.5%, and the top tax bracket was 35%.
If you put money in a savings
account, you were going backwards. For example, look at the table below, assuming
the top tax bracket for 1929 and 2008. As you can see, in 1929, $1,000 in a
savings account produced a return of $34. Last year, by saving $1,000 in a bank,
you lost $39 in buying power!
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1929 |
2008 |
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Bank Interest |
5.28% = $53.00 |
.90% = $9.00 |
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Tax on Interest |
- 24% = $12.72 |
-35% = $3.15 |
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Inflation On $1,000 |
- .6% = $6.00 |
-4.5% = $45.00 |
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Totals |
+ $34.28 |
-$39.15 |
Considering the income eroding environment we live in today, can you afford
to use a financial strategy which does not include tax advantaged investing?
"IT'S NOT HOW MUCH YOU EARN, BUT HOW MUCH YOU KEEP."
If you are expecting income to supplement your Social Security income,
consider the following. Under the new tax law, if you have provisional income of
at least $32,000 Modified Adjusted Gross Income (MAGI), 50% of your Social Security income will be subject to tax.
WHAT HAPPENS TO YOUR COMFORTABLE RETIREMENT?
Even more frightening are the numerous reports your hear about the financial
health of Social Security.
WILL SOCIAL SECURITY BE THERE FOR YOU?
During your working years, a significant portion of your
earnings is lost to you because it is paying for the social security benefits of
others. Then, when your are eligible for the same benefits, they may be taxed.
So as you can see, you don't have to be rich to feel the effects of the new tax
hikes.
And this new social security tax is separate from the increase in tax rates.
The 2009 rates are shown in the following table.
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25% |
28% |
33% |
35% |
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Single Return |
$33,951 -
82,250 |
$82,251 -
171,550 |
$171,551 -
372,950 |
Over
$372,950 |
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Joint Return |
$67,901 -
137,050 |
$137,051 -
208,850 |
$208,851 -
372,950 |
Over
$372,950 |
(And remember, if you are business owner, these rates do not include the
costs/tax of the new health care system!)
In conclusion, you need all the tax relief you can get.
For help on deciding if a tax advantaged strategy is
available for you, click on the link below.
Is Tax
Advantaged Investing Only for the Rich?
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