As an individual, business owner, or investor, you leverage the power of compounding returns to grow wealth exponentially. Using a different approach, you can slash your taxes by layering four distinct tax-cutting strategies. Applying one strategy alone delivers good results, applying two strategies in tandem improves results, and applying all four maximizes your tax savings and increases your net worth. With every added layer, you not only keep more of your money, but also have more to invest to reap the rewards of compounding returns.

This post reveals four key tax-cutting strategies and explains how to leverage them, alone and together, to maximize your savings.

Shifting

Shifting involves moving taxable income from a higher tax rate person or entity to a lower one; for example, from a parent to a child, from an adult child to a parent, from a sole proprietorship to a corporation. In many cases, shifting delivers the added benefit of moving taxable income to a less audited entity, as well. Changing your business entity from sole proprietorship to S-Corporation opens the door to more tax strategies, lower tax rates, and lower audit rates.

Keep in mind that if you don’t specify an entity for your business, sole proprietorship, the least tax efficient, is the default chosen for you. Instead of letting the government default to that choice, make it yourself and take control of your tax rates.

Timing

In the tax world, timing isn’t everything, but it is certainly valuable in helping to reduce one’s tax burden. Timing strategies generally defer taxes to future dates to take advantage of lower future rates or utilize the time value of money. The most obvious tax strategy related to timing involves deferred tax instruments, such as individual retirement plans and 401Ks. Continue reading… Continue reading… Continue reading…