this is urgent okay today i'm talking about how to build a tax plan
or create a tax strategy and this is important because listen 2021 is almost over and you have
to build a tax plan the year before tax season starts okay let me say that again
you want to figure out how to build a tax plan the year before the tax season starts so
even though you will file your taxes in 2022 you should have implemented your tax plan in 2021
and the reason why this is so important is because almost every tax season i have clients
who see their tax liability or they see their tax refund and ask okay what can i do about
this number and sometimes as a tax professional i'm able to actually help but more often than not
it's too late to do anything about their tax outcomes because the tax year is already over with
so in this video what i want to do is help the people who want to be proactive about their
tax situation learn about how to build a tax plan step by step even if you're a beginner stay tuned
hey there and welcome to our channel i'm sean with life accounting the accounting company that helps
you save on taxes and build more wealth please if you like this topic do us a favor and hit the like
button for the youtube algorithm it really helps this video reach more people who also want to
learn about how to create a tax strategy all right let's go ahead and dive in so step number one
understand your tax bracket it's almost impossible to plan for the future if you don't know where
you are in the present and so it is key to understand how much you pay in taxes even if
you are someone who is getting a refund because you are still paying taxes at the end of the day
okay so step number one is figuring out your tax liability and the best way to do that is to make
sure you understand your tax bracket now here in the united states we have a progressive tax system
meaning that the more income you make the more you get tax so i'll go ahead and put up on the
screen right now the 2021 tax brackets now these tax brackets often confuse many people because
people think that they should just simply multiply their total income by the tax rate in the bracket
that they fall into so for example if you had a household income that made a hundred thousand
dollars then what most people would do is multiply that by 24 and think that their tax liability
is 24 000 but that is wrong okay instead the irs divides your income into chunks and taxes each
chunk at the corresponding tax rate for example if your household made 100 000 of taxable income then
only thirteen thousand six hundred and twenty four dollars will be taxed at the 24 tax rate
and in total you'd be looking at something like fifteen thousand one hundred and three dollars
in tax liability after the standard deduction instead of a tax liability of 24 000 which brings
us to step number two of creating a tax plan understand tax deductions and tax credits okay
so by default every american household receives what is called a standard deduction and this is
a tax deduction that is basically given to you so for the 2021 tax year the standard deductions are
thousand five hundred and fifty dollars for people filing single and twenty five thousand one hundred
dollars for people fouling married jointly and eighteen thousand eight hundred dollars for
people head of the household now here's the thing okay you don't have to take the standard deduction
because you can do something that is called itemize your deductions which is more advantageous
to use if you expect to have qualified expenses or deductions that exceed your standard deduction
amount okay now anyway tax deductions and tax credits will influence how you create your tax
plan because you can reduce your taxable income thus lowering your tax bracket okay so what is a
tax deduction these are usually qualified expenses that you use to reduce your taxable income
on the other hand a tax credit is much better because you get a dollar for dollar reduction
on your tax bill so for example let's say that you make about forty eight thousand dollars in income
and you are looking at owing four thousand dollars in taxes well if you have a three thousand dollar
tax deduction that will reduce your taxable income from forty eight thousand dollars to forty five
thousand dollars which would in turn would reduce your tax bill by three hundred and fifty dollars
so now you owe thirty seven hundred dollars however let's say you have a tax credit for one
thousand dollars well that will reduce your tax bill by the total one thousand dollars so now you
would owe three thousand dollars that's a pretty big difference right so it's very important to
know what tax credits and tax deductions that you currently qualify for when you're thinking about
how to build your tax plan and once you have that then you can determine what tax credits and tax
deductions you want to go after proactively all right after proactively now we have some great
videos breaking down different tax deductions and tax credits which i'll link to in the description
below but i do want to just make sure you're taking advantage of some of the obvious ones like
writing off college education expenses home office expenses mortgage interest and property taxes
expenses and getting credits like the child tax credit and the savers tax credit all right before
i continue is all of this helpful so far if so please tell me in the comments section below if
you're learning anything from this video or if you have any questions okay moving along to step
number three determine your tax liability after deductions and credits so after going through step
one and step two you should be able to reasonably estimate what your tax liability will be
after you're considering what tax deductions and credits you want to go after now before you rush
into creating your tax strategy now you want to ask yourself two very important questions
okay number one are you okay with your current tax outcome so you may find that after doing step one
and two that you are paying very little in taxes and that you don't need to make any adjustments or
you may find that you believe in paying your fair share and you are okay with the tax rate that you
pay which by the way the average american pays about 14.6 of their income and taxes every year
the second important question that you need to ask yourself is are you okay with taking home
less income that's right are you okay with taking home less income because here's the deal most
advanced tax strategies involve you making investments into the future the fundamental
tax planning idea is that you defer income and you accelerate your expenses so you really need to ask
yourself if you are okay or if it's even possible for you to take home less income today in order to
have more income in the future at a lower tax rate if so then you can move on to step number four
choose your tax strategy or strategies now depending on how much tax liability you have
you may only really need one solid tax strategy but in general as you make more income you will
need more tax strategies here are three tax planning strategies that you should know about
number one start or invest into a business okay most of the time when you are starting a new
business you have startup costs with zero income so if you are actively building up your business
and incurring expenses then usually at the end of the year you will end up with a business loss
and then you can use that loss as a deduction against your taxable income and i personally like
this a lot because at this point you're actually building a real asset that you own and control
for more future tax write-offs strategy number two put your money into a 401k or ira
now these are tax shelters so essentially the irs doesn't tax you on what you immediately contribute
to these accounts and at the same time you can use these accounts to invest in other assets
like stocks or real estate now the main pushback i get on this strategy is that you have to wait
until you reach retirement age to get your money back tax-free but listen if you don't necessarily
need the income then this could save you hundreds of thousands of dollars in taxes by the time that
you retire and every little bit helps now koran has a great video breaking down 400ks versus
iras which i'll link above and in the description below tax strategy number three maximize your
health saving accounts also known as an hsa so health saving accounts are tax exempt accounts
you can use to pay any medical expenses that you have so think about stuff like prescriptions or
high deductible insurance plans etc okay even amazon has an entire catalog of different products
and services you can buy using your hsa or your fha account at some point you're likely gonna have
to pay for something medically related and why not use your money that is tax free now with a hsa
plan you can contribute about 3 600 every year as an individual with high deductible health coverage
or 7 100 as a family with high deductible health coverage we also have some really great videos
breaking down health saving accounts which i'll link below now of course these aren't all the
tax strategies that you can deploy but hopefully this gives you an idea of how to create a tax plan
so make sure you're subscribed to our channel because we definitely will continue to let you
in on different effective tax strategies okay step number five implement your tax plan now you have
everything you need okay you should know your tax liabilities you should know what tax deductions
and credits that you want to go after you should even know if you want to chase a tax plan
and a few strategies that you can implement immediately so go out there do some math set
up your accounts and figure out how to build your own tax plan now coming up next we have two videos
that i referenced earlier so make sure you check those out next and we'll see you over there peace