Episode 31: 2023 Tax Tips With Lance Belline CFP CHFC

Welcome to a very special tax series – enjoy Free 2023 Tax Tips With Lance Belline, CFP, CHFC!

Lance Belline CFP, CHFC, Financial Advisor joins us for the second episode of our 2023 Tax Tips series. He is a financial consultant who seeks to provide financial peace of mind and clarity in how they plan their financial goals. He recalls the divine intervention that led to his journey to this career path.

We learn how self employed or 1099 workers can open the door to more tax strategies through deductions and other allowable items. Unlike W2 employees (standard job, tax withholding by the company), self employed individuals can write off or deduct mileage, as well as expenses related to the business activities. Having children of age (10 or older) can perform a jobs function with the self-employed company to enable them to be paid up to $12,950.00 (standard deduction) as an employee. This allow for further deductions and lessening your overall tax liability. Custodial parents typically switch back and fourth with filing the child on their tax returns (in a divorce or separation, living separately).

Lance finds that most tax filers are married, rather than single. The tax advantages of marriage can help save money on your overall tax bill. The amount changes depending on the income of the primary filer and spouse and the difference between them. The standard deductions allow for immediate reduction of tax liability and change according to income. Only the money above the standard deduction gets taxed. Tax brackets are determined by the amount of money a person makes in a calendar year.

The highest marginal tax rate currently in 2023 is 37% if the person earns more than $539,999 (single) or $647,850 (married). At one point in history we have had tax rates as high as 90% during the 40s-50s due to the Great Depression. Even in the 1980s, it was almost 50%. We are actually in the lowest tax rate environment we have ever been in. Even though we don’t enjoy it, we should be happy the tax rates are as low as they are…even though it doesn’t seem like it. Without the taxes we will be unable to support Government and Society properly, which is why it is important to pay your taxes. When we are making a good income, save and position your wealth so that you can dramatically decrease the impact Uncle Sam has on you at tax time.

Tax laws enable many opportunities for reducing tax liability that are perfectly legal, ethical and above boards. The trick is knowing the strategies and how to implement them effectively.

We discuss gig workers and the overall gig economy and qualifying deductions and expenses, which are one of the factors in reducing your tax liability. Even older equipment can be utilized through depreciation and can qualify as a deduction. Everything from phones, gas, food and meals, to equipment and office related costs can qualify as a deduction. It is possible to operate at a loss with expenses greater than income, but only during the first year. This is fairly common.

Filing as self-employed many people file as either a Sole Proprietor or an S Corporation (after forming an LLC). The benefit is in the Social Security Tax paid. Self-employed individuals are required to pay into Social Security and this strategy offers even greater tax relief. This is taken through a distribution, but is not considered part of your salary. The advantages of each option depend on an individuals unique tax situation.

Conversely, a W2 employee is someone who has taxes withheld by the company they work for, but people need to remember to choose the proper withholding amount during the hiring process. if a person does not withhold enough, they will owe taxes at the end of the year. Those who withhold the proper amount will likely receive a refund at the end of the year. Bonuses are also taxed, which can be a surprise to some filers. Supplemental wages have a different tax rate, which applies to a bonus earned.

Contributions to a 401k can be pre-taxed or taxed upon withdraw. A health savings account or HSA allows for contributions that allow for deductions from your taxes. This is a useful strategy for W2 employees. There are fewer ways to lower taxable income for W2 employees. Choose a Roth feature within a 401k to minimize tax liability. Dividends and gains are taxed at a rate varying between 0-20%.

Tax strategies exist that allow for as little as 1% tax rates! It’s all about strategy and leveraging the existing tax laws to your benefit. Charitable giving has to go through an organization and cannot be cash, for example, to a homeless person.

Lance created a “Bucket Strategy” that he uses to reduce tax liability and maximize return. He has also authored a book outlining strategies used successfully with real clients over the years. The key to developing wealth is to start early. Compounding wealth is the vehicle. If starting late, save more to make up for lost time.

His book “More Wealth, Less Taxes” helps readers learn to invest and save while lessening their tax liability and leveraging strategies available to them. If you want to have more money in retirement, Lance can help you make it happen as long as you are patient.