If I’m a high W2 earner

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  • #84486 Reply

      .. would there be anything I could do (in terms of starting a business, real estate, etc) that would require low effort (or get my spouse to do who doesn’t earn) that could reduce our taxes by at least 5-10k?

      #84487 Reply

        Yes and No. Meaning that running a business and Real Estate has tax advantages but for it to reduce your AGI you would have to operate at a loss. I’m not CPA. But essentially you would be spending more money to save a little money.

        Now with real estate if you leverage and you don’t use your own cash it “can” help but you are assuming risk and it’s a two edged sword.

        None of those is “low effort” especially in the beginning.

        You may be already doing this but if you max out your traditional retirement accounts (401k HSA and IRAs) those will be easiest and simplest to reduce your “income”.

        #84488 Reply

          I would suggest looking into an MLM. That’s a good way to loose money lol

          Outside of that, technically yes starting a business you could write off your tax loss for x amount of years. However the goal in that case would be build additional wealth.

          If your not already, I would max out Roth’s for you both. Then I would max out HSA. And work on paying off any possible negative debts and donate an amount to an organization you enjoy that’s a tax write off.

          Also, check out: How much do you personally contribute to your HSA monthly?

          #84489 Reply

            Buy real estate and have wife /qualify claim REPS (real estate pro status). Accelerate depreciation. If one of the couple is REPS.. It can offset income from high w2 income earner.

            #84490 Reply

              The main way I know of to do this is to purchase assets that you can depreciate over time and hold them. Rental real estate is an example. Research the recapture rules and be prepared to hold the property for a very long time unless you are comfortable with paying back the tax write-off when you sell. The other way is to use a room on your home to run a small business.

              You can deduct your expenses relating to your business (including the fractional expenses associated with that room when it is being used for business).

              Of course, a business could increase your income, but that’s a good problem to have. The first one can be done even if you take the standard deduction; for the second one, I believe you have to itemize. I’d recommend getting a CPA if you do either because it can get complicated fast.

              #84491 Reply

                Yes, there are ways. I normally don’t share this on post like this, but I feel like may have a solution to your question or at the very least could be an excellent referral source for you and send you where you need to go. But I am a fee-only financial planner, who works with people looking to build wealth, diversify their investments, and reduce their tax burden through real estate and entrepreneurship.

                These are the ways to crazy “above the line” deductions for your taxes and the best way to optimize your tax burden legally by proactively implementing what needs to be done correctly. This strategy does require some level of participation on your part but you can still choose how involved or pass if you want it to be, but that does affect the amount of tax optimization and reduction you’ll be able to achieve. So if that is something you’re interested in I usually share my business on the thread on Thursdays where people are allowed to share their side hustle.

                So if you’d like you can look me up in that thread tomorrow but I will never solicit or DM you or spam you in anyway. So if you’re interested in talking and learning more, please look for my post on tomorrow’s share your side hustle thread or however you’d like to touch base. But yes, there is a lot you can do. Just gotta do it the right way. Good luck! And congrats on this “problem”!

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