1. Employ Your Kids Business owners listen up If you have kids under 18, you can: • Employ them • Pay them $13,850/yr tax-free • Deduct your kids' salary from your taxable income When you employ your kid, that's a business expense And business expenses are tax-deductible

When you hire your kids and pay them $13,850/yr: • Your kids won't owe income taxes • You don't have to pay taxes on the $13,850 • You can open a custodial Roth IRA for your kid, invest up to $6,500 cash, and build long-term wealth Your kids will thank you later

2. S Corps An S Corp is a tax classification So if you have an LLC, consider electing S Corp status to save money on taxes S Corps help you save on: • Self-employment taxes (Social Security & Medicare) In fact, for every dollar you make, S corps could save you up to 15.30%

With an S Corp, you can reduce your salary Salary requires payroll taxes As long as you take a "reasonable" salary from your business's profits, you could save money on payroll taxes And you can take the remainder as distributions, which aren't subject to payroll taxes

3. HSAs HSAs offer a triple tax benefit - if you have a high-deductible health plan You get a: • Tax deduction on contributions • Tax deferral on investment growth And as long as you withdraw money for qualified medical purposes, you will never have to pay taxes

4. 1031 Exchange A 1031 Exchange is when you legally defer paying taxes on the gains or profits of highly appreciated real estate investments You essentially swap 1 real estate investment property for another But beware, there are many rules and exceptions

Some of these rules include: • Properties exchanged must be like-kind • You must have an intermediary • Within 45 days of the sale, you must designate the replacement property • You must close on the new property within 180 days of the sale of the old property

5. Primary Residence Capital Gain Exclusion You can defer paying taxes on up to $500,000 of gains if married filing jointly ($250k if single). The primary rule includes: • You must have owned & lived in your home for 2 out of the last 5 years

6. Muni Bond Investing Generally speaking, income earned from muni bonds is exempt from federal income tax Here's a general rule of thumb: If you're in the 32% tax bracket or higher, you should probably consider muni bonds as an investment vehicle producing passive income

7. QCDs If you're: • Nearing your RMD age (73 in 2023) • Expecting to pay a lot in taxes • Don't need the RMD money • Charitably inclined Then a QCD might be right for you

With QCDs, you can directly gift your RMD to a charity (up to a maximum of $100k/yr) and not pay a penny in taxes The key to QCDs is that you do not take receipt of your RMD first The RMD must be sent directly to the charity from your IRA to avoid paying taxes

8. Defined Benefit Plan (DBP) If you're: • Self-employed • Making a lot of money • Want to save a lot in taxes Consider opening a DBP In 2023, you can contribute up to $3.4M in some DBPs

DBP contribution limits are typically: • Actuarily calculated • Based on age & income DBPs allow for: • Tax-deferred growth • Tax deductible annual contributions • The ability to roll over your benefits to an IRA at retirement

9. DAFs Anyone can open & invest in a DAF in America - online You would receive an income tax deduction in the year of the contribution Once you've contributed to a DAF, you can invest your money And in the year of the contribution, you'll get your income tax deduction

Here's how you could get a tax deduction: • Non-cash assets = up to 30% AGI deduction • Cash = up to 60% AGI

10. Solo K A Solo K is a 401k that is available to business owners with no employees You can make contributions up to the maximum 401k contribution limit ($66,000) as both an employee & employer

Solo K's also allow the spouses of business owners to contribute up to the maximum annual 401k limit That's as long as the spouse earns income from the business So in theory, both spouses could save up to $66,000 per year

11. Tax Loss Harvesting (TLH) You can cut your tax bill with TLH Here's how: • Sell an investment at a loss The loss can reduce your: • Taxable gains • Ordinary income (up to $3,000)

Just beware of the wash sale rule: You cannot sell a stock at a loss & then repurchase it within 30 days. Otherwise, the initial loss cannot be claimed for tax purposes

If your losses are greater than gains, you can carry the losses forward to future tax years to offset income (or capital gains) Let's say you: • Recognized $30k of losses & $20k of gains in the same year • You can use the $30k in losses to offset the gains And you owe no tax

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