reducing our tax liability - protecting that money and retire?
I’m in a tough position. My wife and I both work with a combined salary of roughly $250K a year. We are doing everyhing that we can think of to lower our tax basis. We fully contribute to our 401ks (maxed). Our home is fortunately (from an interest perspective) almost paid off, unfortunately little deduction is left due to minimal interest. We have no dependents to claim, or sock money away in tax deffered accounts for. We just started putting into IRAs for both of us (not for the deduction since it doesn’t apply, but for the tax deffered gains).
We have no debt, thus no need for a home equity loan. We are in the strange position of being very cash rich and on a great track to an early retirement but we are getting pummeled tax wise for it!
What can we do? There seems to be little if any option for people in our position. How can we “protect” our money further from the constant crunch of Uncle Sam?
Friends have said we should buy another house but I don’t see how creating additional debt (and paying more interest) helps us protect our money further or gets us to retirement any quicker. Plus I assume we would have to make that our primary home to even take the deduction and quite frankly we like where we live.
Help!!
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October 18th, 2008 at 12:35 pm
Put your money in a Swiss Bank Account. If anybody asks.. You went to Las Vegas and lost it.
October 21st, 2008 at 12:28 am
Look into purchasing investment real estate. Perhaps a small apt. complex, or two. Maybe 12 to 15 units per complex. Good write off and great income later.
October 23rd, 2008 at 11:07 pm
You can’t. According to the Democrats you are RICH and NOT paying your FAIR share.
Just live below your means and save 20% of your income. You will have a happy and wealthy retirement.
October 25th, 2008 at 10:37 pm
Believe it or not, you should mortgage your home as much as possible and use the money for a tax-deferred investment. A Roth IRA would be my first choice, but you’re not eligible. I would look at an insurance policy (prefer Northwestern Mutual, but there are others). Your home will continue to appreciate at the same rate whether you have a mortgage or not and you can use the cash from the mortgage to pay the premiums. At least talk to one of the NWML agents about this strategy. Then make your own assessment. [I am not associated with Northwestern in any way].
October 29th, 2008 at 12:09 am
Short of taking a huge paycut or giving all of your money to charity, there is nothing that you can do.
While most rental real estate creates a tax loss for the owners, your income is too high to take that loss. Some people would suggest starting a business but, according to the IRS, you must have a profit motive. You can not start a business just to lose money and take write-offs.
You could look at the bright side. Having to pay a lot of taxes because your income is high is not a terrible problem to have.