Wednesday, June 3, 2020
The IRS allows tax deductions in order to promote certain behaviors like saving for retirement and it is your right to know about the ones you are entitled to. Contrary to what many people think, you do not have to be rich to take advantage of tax loopholes. Ordinary people like married couples, single people, and even poor people can take advantage of tax loopholes.
Here are a few of the loopholes available:
The 529 Plan Double Dip Loophole
When you use a 529 plan to pay for college expenses, you don't have to pay taxes on the amount you earned from what you invested. If you qualify based on income limits, you can take advantage of the American opportunity tax credit or the lifetime earning credit.
The Backdoor Roth IRA Loophole
There are some income restrictions for people who contribute to a Roth IRA, but there's a way around these restrictions. If you earn more than $139,000 for a single taxpayer or $206,000 as a couple, you make too much to contribute directly to a Roth IRA. However, you can contribute to a traditional IRA. You can then convert the regular IRA into a Roth IRA. When you retire you can withdraw from your Roth without paying income taxes when you take the money out.
Carried Interest Loophole
This one is for hedge fund managers that get their income from funds whose profits are considered carried interest realized over the long term, so their income is taxed at the long-term capital gains rate instead of the standard income tax rate.
Click the link below for the other 20 loopholes, there may be a few you can take advantage of!
See Brian Nelson, 23 Ridiculous Tax Loopholes, GO Banking Rates, June 2, 2020.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.