How many taxes are there for you to pay? There are some obvious ones. Income tax, sales taxes, property tax. There are more. Hundreds more. Most are invisible, just part of the price of the product.
Taxes are, by far, the single biggest expense in most families. Does anyone manage that expense? Usually not. It is not an easy one to manage, but worthy of some thought. Businesses have more options and more constant contact with advisors. They do a little better because they can reorganize some things to take advantage of situations.
You can too.
Keep the important tools in mind. Most tax plans rely on four principles.
- Divide income. Two people, each with half the income, pay less than a single taxpayer.
- Defer income. Taxes paid later earn income in the interim and you keep some of that.
- Deduct. Find what you are entitled to deduct from income and perhaps reorganize your affairs to take advantage.
- Change income type. Business income has more deductions than salary income. Real estate rentals, dividends and capital gains have more deductions or lower rates than interest.
How strange. Do you suppose the government figured out that most people would rather earn salary or wages than own a business? Do they think interest feels better than the stock market? Do they know most people won’t read the Tax Act?
Do you suppose taxes on employment income and interest are higher than almost anything else by accident? Maybe. They have a history of taxing things you want to do more than things you don’t. Think liquor, cigarettes, and gasoline. Far higher than the tax on broccoli. Governments are not completely isolated from reality.
With all of this effort to extract money from you, comedienne Paul Poundstone has found another anomaly. The bible, Romans Chapter 6-23 notes “For the wages of sin is death.” Paula suggests we should not worry. After taxes, the wages of sin is just a tired feeling.
You do not have to be a tax victim. Even modest tax management provides a meaningful benefit. Seek help.
Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.
Please be in touch if I can help you. firstname.lastname@example.org 866-285-7772