Top 6 Strategies to Protect Your Income from Taxes

Shocked at the difference between your gross and net incomes? Here’s how to soften the blow.

When you get your paycheck, are you looking closely at the itemized list of all the things that are taken out automatically? Typically a paystub shows that nice big gross income amount at the top, and then as you move down the page you’ll notice that your actual net income is significantly smaller after all the taxes and other things have been taken out.

All of the money you earn from your work gets taxed in many ways, and taxes are difficult to legally avoid. However, there are strategies you can apply to help alleviate the high number that is taken from you each pay period. Below are six top ways to protect your income from taxes.

By Barbara A Friedberg

Municipal Bonds
If you have savings or investments, there are ways to avoid taxes on the income from those investments. Most municipal bonds are federally tax-free. When you buy an individual municipal bond or a municipal bond fund from your own state, then the interest payments from that income are also tax-free. The downside of municipal bonds may be the lower income than from comparable taxable bonds. Find out by checking the bond’s tax equivalent yield.

Long-Term Capital Gains
Investing can be an important tool in growing your long-term wealth. An additional benefit from investing in stocks, bonds and real estate is the favorable tax treatments for long-term capital gains. When you invest in mutual funds and individual financial assets, own them for longer than one year and then subsequently sell for a profit, you pay a lower capital gains rate on the money earned. The rate may be as low as zero for those in the 10% or 15% tax bracket. This is an excellent strategy to both improve your financial situation and your tax liability.

Start a Business
In addition to creating additional income, a side business offers many tax advantages. When used in the course of your daily business, many expenses can be deducted from your income, reducing your total tax obligation. Especially important tax deductions are health insurance premiums. Also, if you follow the IRS guidelines, you may deduct part of your home expenses with the home office deduction. The portion of your utilities and Internet used in the business may also be deducted from your income.

Max Out Workplace Retirement Accounts
For 2018, you can reduce your taxable income by $18,500 when contributing to a 401(k) plan or 403(b). If you’re age 50 or older, you’re allowed to add $6,000 to the basic workplace retirement plan contribution. Thus, if you earn $100,000 and contribute $18,000 to a 401(k), then only $82,000 of your income will be taxable.

There are still tax breaks if you don’t have a 401(k) or 403(b) at work. Contribute up to $5,500 ($6,500 if you’re over age 50) to an IRA. Depending upon your income, you may be able to deduct some or all of this contribution from your taxable income.

Go for a Health Savings Account (HSA)
With the preponderance of high deductible health insurance plans, an HSA can also reduce taxes. Similar to a 401(k), you contribute money before taxes to an HSA. In 2018, the maximum contribution amount is $3,450 for an individual and $6,900 for a family. This money then grows without the requirement to pay tax on the earnings. An extra tax benefit of an HSA is that when used to pay for qualified medical expenses, withdrawals aren’t taxed either.

Get IRS Credit
There are many IRS tax credits that reduce your taxes dollar-for-dollar. For example, the earned income credit helps lower-income taxpayers reduce their tax bills. The American Opportunity Tax Credit offers a maximum of $2,500 per year for eligible students. There is the saver’s credit for moderate and lower-income individuals looking to save for retirement. Lastly, the Child and Dependent Care Credit helps offset the expenses of raising your children.

The Bottom Line
A few hours spent at and scouring the internet for tax savings may yield hundreds and even thousands of dollars in tax savings. Although it’s important to pay all that you legally owe to Uncle Sam, you’re not required to pay any extra. Researching the tips above should help.

So which in what ways are you protecting your income from taxes? Let us know in the comments below, and be sure to visit our Services page to see how we can help you in your path to financial success!

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Millennials Can Win The Holidays Without Going Broke!

Do you have a holiday budget in place this year?

Holiday shopping. For some, it’s thrilling to spend hours going from store to store, painstakingly searching for that perfect gift for everyone on your list. For others, the thought of holiday shopping brings on a lot of uncertainty and anxiety.

The worry probably comes into play when you don’t have an actual firm budget in place to keep your gift spending in check. I for one know it’s so easy to get overzealous and spend beyond your means when shopping for gifts for others. This year, though, I have a gift budget in place and I’m sticking to it! The article below will help you, my fellow millennials, to do the same.

By Jill Cornfield

Plan now and avoid buyer’s remorse.

That’s the advice from personal finance website Money Under 30, which found millennials are less price-sensitive and twice as likely as the general population not to know their credit scores.

The site asked 612 adults, including 159 millennials, in April about their finances and what they thought about their own financial futures.

Overall, the survey confirmed millennials lack much of the basic knowledge a person needs to have healthy financial life, says Yoni Dayan, senior editor at Money Under 30.

A third don’t know their credit scores. Half aren’t contributing to a retirement savings plan, and 10 percent don’t even know whether they’re saving for retirement.

Source: Money Under 30

Dayan calls it an interesting contrast that, while millennials are more dissatisfied with their finances than other generations, they’re also much more optimistic.

Now that the holiday season is coming up, they are also perfectly positioned for financial disaster, given their precarious finances.

Americans, in general, took on more than $1,000 in holiday debt last year – and three-quarters said it was because they didn’t budget successfully for the season.

This year’s holiday spending is slated to top $1 trillion for the first time. In other words, the potential for taking on debt is higher than ever, especially for younger people.

Source: Money Under 30

For younger consumers, convenience rules, and Amazon shares part of the blame for making millennials less sensitive to prices.

“We order almost everything via Amazon Prime, with full knowledge that we could get the items cheaper with a bit more effort, but it’s just so easy to order it and expect it in two days or less,” said Priya Malani, a founding partner at financial planning firm Stash Wealth and herself a millennial.

Another danger of e-commerce: drunk shopping. Yes, that’s a thing, and millennials are the generation most likely to shop under the influence, according to Sixty-one percent of millennials admit to this. In comparison, just about half of Gen Xers shop online after they’ve had a few.

“Combined with our ‘you only live once’ [YOLO] mentality, it’s no surprise that we’re poised to be the biggest spenders around the holidays,” Malani said.

‘Yikes, who’s paying for this?’
Surprised by the holidays? Just kind of snuck up on you? Many people take this as a cue to start racking up some hefty credit card charges, as if they have no choice in the matter. “Then January rolls around, and we’re like, ‘Yikes, who’s paying for this?’” Malani said.

Set realistic goals
Millennial money regret usually results from not planning— and last-minute planning isn’t really planning at all.

Malani recommends automating holiday spending with a small, monthly amount. “When the holidays roll around, they can put all expenses on their credit cards to hack those rewards points,” she said. “They know they have the funds to pay off the bill in full.”

How to do it: Figure out how much you spend or would like to spend. Set up your savings account to automate one-twelfth into a designated account. “The money accumulates all year, and you can blow it guilt-free at the holidays,” Malani said.

Make a list, check it twice. It seems obvious, but every person and animal you plan to buy for needs to be on that list. “Put a dollar value by their name and add up all those numbers,” Malani said. If you don’t have that money now or you won’t have the amount saved up, then you’re making a plan you cannot afford. “Hashtag, harsh but true,” Malani said.

What’s in your wallet?
Don’t spend money you don’t have. “Instead of thinking of your credit card as free money, think of it as a smarter way to spend the money you already have,” Malani said.

Never charge more than you can pay off when the bill comes due.

Treat your credit card like a debit card that pulls the money out of your account once a month. Would your family or friends really want you to go into credit card debt to buy them a gift?

Think outside the gift box
Some gifts, such as a Netflix membership, can be shared by several people in your family.

People who live far from their families might consider attending a family gathering. “The whole ‘your-presence-is-a-present thing,’” Malani said.

Try a gift exchange so you buy one gift versus gifts for everyone. Secret Santa arrangements are popular. Handmade edibles and DIY gifts are also a welcome change from the usual store-bought items.

So how will you be keeping your holiday gift spending in check this year? Leave a comment and let us know!

Read the full article here.

How to Increase Your Net Worth

Do you know your net worth and how to make the most of it?

Your net worth is essentially a dollar amount that shows the total value of your assets, minus your debts. Assets are things such as retirement savings accounts, your home, and valuable possessions like a vehicle or jewelry. Debts include things like mortgages and credit card balances. When you know your net worth, you have a great way to gauge your overall financial health.

The average net worth varies greatly based on your age. For example, the average net worth for a person who is 70 – 74 years old is $225,390, while the average net worth for someone under 35 is only $6,900. What a huge difference the years can make!

As you can see, your net worth typically increases with age. But you can also do some things right now to improve your net worth. Check out these 10 ways.

By Thomas Minter


If you want to improve your net worth, then a mentality shift may be in order. You may need to reexamine your everyday financial choices depending on where you are today, and that isn’t always easy.

For example, you may need to embrace frugality, forgo little luxuries, or put off a purchase or vacation because you would have to use credit to make it happen. Your net worth can only grow if you increase your assets and reduce your liabilities, and that may require sacrifice. Without a net worth mentality, making these hard choices might be impossible, so you need to adopt a mindset that prioritizes building your net worth if you are going to succeed.


You can’t monitor your net worth if you don’t know what it is today. While you can certainly do the math yourself, this isn’t always convenient, especially if you have a lot of accounts. Luckily, there is a better way.

Tracking your net worth with Personal Capital is an easy way to get started. You gain access to a wealth of helpful tools that can make taking control of your financial life simpler than ever before.


Both your credit score and report are critical components of your financial life. They determine your eligibility for a range of financial products as well as the interest rate you’ll end up paying.

When you monitor your credit, you empower yourself to make smarter decisions about money and debt. If you want to monitor your credit for free, then Credit Sesame is a great option. Not only can you see your score every month, but you also get personalized recommendations designed to improve your financial situation.


When you add new streams, you not only diversify your income but also create opportunities to build new skills and potentially reach greater levels of professional success.

Choosing a side hustle that offers you flexibility and income-generating potential, like starting a blog through Bluehost, can be the key to bring in extra money and even providing yourself with more financial security. Whether you decide to save, invest, or use the cash to pay down debt depends on your goals, but every dollar can make a difference when you want to improve your net worth.


An emergency fund provides you with a financial buffer against the unexpected. Whether it’s a surprise medical bill, car trouble, or an appliance failure, you don’t have to resort to adding new debt to handle the situation.

If you build your emergency fund with Radius Bank’s Hybrid Checking, you make sure your money is always working for you thanks to the generous interest rate. That way, your emergency fund grows over time instead of just sitting there stagnant.


Since debt is a financial liability, it harms your net worth. By focusing on paying down your high-interest obligations first, you not only improve your net worth but potentially save yourself a ton in interest. Plus, the less money you have going out to pay down debt, the more you can save and invest, giving you another chance to secure your financial future.


A healthy retirement plan is at the core of your overall financial well-being. By optimizing your 401(k) with Blooom, you receive personalized reallocations that improve the performance of your account. And, when your retirement count is working to the max, it grows faster, allowing your net worth to rise right along with it.


Investing can be a great way to bolster your net worth. Your money can usually grow faster than it would in traditional savings accounts, but its also more accessible than if you stash it away for retirement.

Today, there is a slew of easy-to-use apps to help you get started. Options like Acorns and Stash make micro-investing (investing by socking away small amounts – like spare change – frequently) a breeze, while Betterment, a leading robo-advisor app, allows you to take a “set it and forget it” approach to reaching your investment goals.


If you haven’t received a raise or promotion recently, then it may be time to ask for one. As long as your request is reasonable and aligns with salary norms in your field and location, there is little harm in asking.

Before you broach the topic, do a little research and come armed with evidence that showcases your value as an employee as well as what the average pay rate is for similar professionals in your city. This gives you the best chance of making a solid point, increasing the odds your employer will say yes.

Since your income plays a big role in your net worth, pursuing a raise when one is deserved is a smart move. After all, many companies aren’t going to increase your pay without a catalyst, so consider being the spark that leads to better things.


A natural disaster can wreak havoc on your financial life if you aren’t protected, so make sure you have the right amounts and kinds of insurance coverage for your home, personal property, and vehicles. While you send money out the door in premiums, it beats having to potentially pay for thousands of dollars in major repairs or replacements out of pocket, as well as legal bills in cases involving liability.


Ultimately, knowing how you stack up compared to the average net worth and striving to improve your each and every day, you position yourself to have the best financial future possible. Start using some or all of the tips above today, and see if your personal net worth doesn’t start heading in the right direction.

So, do you know your net worth? Or, in what ways have you worked to increase your net worth? Let us know in the comments!

Read the full article here.