Violeta 0:00

So another tax season is officially come and gone. April 15th has just passed. And how are we feeling? How do we feel? Did you have to pay taxes? Did you get some money back? Especially my higher income earners. You know, when I was a W-2 man, I hated seeing how much taxes got taken out throughout my paycheck. And then at the end, most of the time I got a refund, especially now that I have my daughter, I would get one. But yeah, if you feel that taxes were a lot this year, maybe it's time to start doing some tax planning and figuring out how to reduce your tax liability so you could keep more money in your pocket. And so today I want to share some tips with you for mainly W-2s. Most of these also apply for like if you're self-employed or you have a business, but I want to kind of cater towards the W-2 people because, especially if you're a high income earner, or if that is your goal to you're pursuing a high income, then it's never too early to start thinking about taxes because you will notice as the more money you make, the more they're going to tax you. And so I want to share some tips and things I've learned along the way. Now, a quick little disclaimer: I am not a tax professional, so definitely get with your CPA if you don't have one. Now it's the time to start finding one and scheduling out maybe some tax planning. But yeah, today I just kind of want to give you like a quick little guide on what you should be thinking about, things that may help you reduce your taxes for next year, and you can start doing things now. So that way, next year you are prepared and you have been taking action all year. Now, again, this episode I want to cater it more towards the W-2, but a lot of tax benefits do apply for businesses, but you don't really need a business to be able to reduce your taxes. So there's a lot of different strategies, a lot of things you can do to benefit yourself and reduce the amount of taxes that you pay. Before we get into the tips, I do want to cover a few definitions, I guess, between deductions and credits because each one gets applied differently and different ways that you can use them. So deductions are things that you use to lower the taxable income that you have made. And credits reduce your taxes dollar for dollar. And I guess the big difference there is a deduction helps offset. So let's say you made $50,000, you start using deductions to reduce the tax income that is taxed, right? So as you start doing deductions, let's say it's a $1,000 deduction. So now it brings your income from $50,000 to $49,000. And then you add another thousand and then it brings it down to $48,000. So you start using deductions to lower, to basically offset what you made throughout the year. And so then what's left over, it is what is taxed, and you pay taxes on that. And so with the credits, it's different because this is not used to reduce your taxable income. It is based to offset what you already owe. So saying $50,000, you owe, let's say, I don't know, like $5,000 in taxes, right? Just a random number. Then that's what you owe at the end of the year. That's your tax bill. Credits come in and start, you know, let's say you get a thousand dollar credit for school or whatever. I don't know the actual number off the top of my head, but let's say you it's a thousand dollars. Well, now you only owe $4,000. So you could see a little bit of the difference versus a deduction, which you start bringing down that income that you made throughout the year. And a credit is something that is used to reduce your tax bill that you already have. Right. So now that we have those two main definitions and you understand the difference between a deduction versus a credit, we could get into the tips because I'm going to be talking about deductions and credits. So the first one is using a pre-tax account. This is your 401k, your HSA contribution, all of that. You can move your money into these before the taxes hit your paycheck. So that is a good way to like funnel income that you are currently making into these accounts that are going to benefit you, like your 401k, it's a retirement account. And you know, we could get into the nitty-gritty of like a Roth IRA and so on, but you move this money into these accounts before it gets taxed, depending on what you pick. And that way it reduces your tax income because it got moved there. So again, that $50,000 and you put like $5,000 a year for that year in your 401k, now it's $245,000. And in this way, you are basically shrinking the income that the IRS can tax on. So instead of the IRS taxing your full paycheck, that's going to only tax what's available after you sent the money to your 401k. So that's why you'll hear a lot of financial experts talking about making sure you're maxing out your contributions if you can, because you know that also helps reduce the taxes that you pay on at the end of the year and so on. So it's a great way to help offset what you're making and pay less taxes, and you get to invest. And of course, we all know what happens when you're investing, it compounds, and then that's money that it just keeps growing. The next tip is understanding the tax credits that you can receive. So, for example, of course, if you have a child, you have the ability to have the child tax credit or the dependent care tax credit. For this one, it has to be a qualifying child under the age of 17, and it has to be someone that's claimed as a dependent on your tax return. And with the child tax credit, this gives you a credit of $2,200 per child. And this was for 2025. So again, that starts to reduce what you owe for in taxes. So again, the difference between credit and deduction. Now there are talks about increasing the credit, but you know, it is still in the work. So make sure if that applies to you, you're keeping track of what the new legislation is coming out, especially also for my higher income earners. Of course, this credit starts to be reduced the more money that you make and starts getting phased out. Like once you start making over $112,000. If you're single, if you're married, it's $150k. So then it starts kind of reducing that amount. So be aware of that of the credit. The other credit is the earned income tax credit. This is more for like low to moderate income families, and there's like a credit that helps offset the taxes that you may owe. So that applies to you. Make sure you check. And I'll have all this, the link to the credits down in the description. So you could look up and see what applies to you and how you can use it. But yeah, there's the earned tax credit. We talked about the child tax credit, and there's a whole bunch of other different tax credits that I don't want to go. There's a quite a few. So again, I'll link it below. But things that you could think about is like first-time homeowner credit, electrical vehicle credits, health care credits, education credits, double check that all what applies and if they're still available because you know it's it's changing each time. So make sure you're checking each year to um make sure, you know, what credits are available and how much and so on. So you could plan accordingly. Another thing to think about is your standard deduction versus itemizing. And again, get with your CPA to see which one would be more beneficial to you. Most people just take the standard deduction versus itemizing, which means like you're going through each specific item to offset your income. And that's mostly for people that have like, let's say, a mortgage interest, state local taxes, if you donate, things like that, you might benefit more from itemizing. Uh, one thing to note is that if you are itemizing, to be tracking of that, so that way you could give it to your CPA. And just, you know, again, talk to your CPA to figure out which one would be more beneficial for you. There's also medical, you know, health and medical strategies that you can do. So medical expenses can be deducted if they exceed a certain percentage of your income. HSAs, they have a triple tax advantage because you can put pre-tax dollars, it grows tax-free, and it's tax-free to use, which is awesome, especially if you have like high deductible health insurance. Then this is an option that you can use. And I know a few people that have used this to be able to put their money in there. Again, that's that's moving money that the IRS could tax, and you're moving it before they tax it into these HSAs, which is great for medical care. And there's so many different ways you can use it, but again, it has to be for medical and health care. So check it out. Go research, see if it's something doable for you that's going to be beneficial. Again, you put pre-tax dollars in, it grows tax-free, and it's tax-free to use. So it's like a great option as well to not only help offset your health care costs, but also reduce your taxable income. The other thing that I want to talk about, and this one is a little bit going against the grain, is adjusting your withholding. Now, it's a little bit against the grain because most of the time people want to overpay their taxes because it's a little safer option to just go ahead and not claim as much as you can. So that way you pay the taxes now and you don't have to worry about it later when you file your taxes of having a tax bill because you underpaid throughout the year. But I would say, and this is my opinion, this is what I am doing well with my husband because he's uh W-2. I'm not a W-2 right now, so but if I was, I would adjust my withholdings to get the max like options to be able to pay less taxes now. And I would do it for two main reasons. Number one is with everything going on, there's a freaking war going on. I see it as a form of resistance of not giving money or I mean, they're taxes, so you have to give them, but I'm not going to make it available to them throughout the year for them to fund to continue to fund these wars and continue to fund these programs and things that are terrorizing the Latino communities. So it's a little bit of a moral thing and ethical thing for me in a in a form of resistance to withhold the taxes throughout the year. And at the end, I'm also strategizing that I'm going to also pay less taxes. So that's one reason. So if it's something that is you're passionate about being anti-war and helping the Latino community or trying to find ways to resist, this is a great option with the caveat that you should have a plan in place to pay those taxes at the end of the year. So if you don't have good financial habits right now, maybe this may not be a good option for you if you just want to play safe. If you feel better, it's going to reduce your financial anxiety to just go ahead and just have high taxes now and then pay them late so you don't have to pay them later. That's perfectly fine. But that's just one of the reasons that I would adjust my withholdings. And the second reason, which is one of the main reasons, also that I told my husband to adjust his withholdings, is because that's more money that we get to use right now. And with prices going up, I mean, gas has gone up over a dollar, and grocery bills are stacking up. I need that money. I need the money right now versus the government using my money and using it to fund these wars and to terrorize our communities. So I think it's a good option too for people that need a little bit extra cash. It would benefit you now, right now. So if you're able to go ahead and adjust those withholdings, but again, big disclaimer, big warning or whatever, make sure you have that plan at the end of the year, whether you create a plan to reduce your taxable income or increasing your credits or whatever, or putting money aside each month and putting it in like a high-yield savings account to save that money to pay off the tax bill that you'll probably get at the end of the year. But those are two, you know, main reasons in which why I am telling my husband to adjust his withholding again is a form of resistance and to I rather use my money for me to help me survive this economy and use it to pay my bills versus giving this money a free loan to the government to do look at all this craziness that they're doing. So just something to think about. Not to mention that extra income, you can use it to invest as well. You can move it into an investment, and you could also, you know, if you're wanting to get into real estate, that's a great option as well. The last tip I want to talk about is ways to reduce your taxable income. And we talked about a few, right, with 401k and stuff like that. But don't forget that there's other options, whether it is starting your own business. This can be, you know, a side hustle, something that you're good at. You know, start looking into that because there's a lot of benefits into starting your business as well, a lot of deductions that you can take, especially if you do real estate investing. Real estate investing is also a business. It's my personal strategy. Matter of fact, I just did a podcast episode where we talk about all the real estate investing tax benefits in my other podcast, Real Estate Cheese Mail. I'll have it linked down below, and we talk about how you can use these tax deductions to reduce your tax liability. And it can be as simple as like doing a quick Airbnb. My co-host, matter of fact, she made her garage into an Airbnb, or maybe you have a room that you can turn into Airbnb, and you don't have to do it like the whole year. Um, we talk about how you can use just a few days out of the year, and now you can use some of those tax deductions to offset your W-2 income. And we also talk about some other ways that I am planning now that I'm doing more active investing to offset the W-2 income from my husband. So go check that out if that's something that you are interested in. And lastly, my last few tips is how I've been mentioning this whole episode is make sure you find a CPA. I know we like to kind of do things on our own and we like to save money because CPAs do charge a fee. But let me tell you, the fee that my CPAs charge me is well worth it because each time I learn something new, they find all these deductions. And even though I was like high income and all that stuff at that time, and of course, with real estate, and as you make more money, as you invest, as you create businesses, let me tell you, taxes get really complicated. But having a trusted CPA helps put someone in my corner that is going to be looking at my taxes with a fine-tooth comb and finding all the deductions and credits that I can get. So that way I can reduce my tax liability. That's more money in my pocket that I keep to continue investing. But also, I can schedule a tax planning strategy call. And now I have a game plan for this year, which is one of the reasons I'm doing active real estate investing and other things to help reduce my husband's W2 income, as mentioned before. So definitely get somebody in your corner, even you know, just schedule a call and see, start learning about these taxes. Just, you know, again, the the IRS website is there. It's pretty simple. They explain it pretty well in just general terms. So that way you can get an idea. Again, still also combine that with the CPA to make sure that you understand everything correctly and use it to your advantage. But just start keeping track of these things, start keeping track of this legislation. There's legislation that keeps coming up and trying to get introduced to help offset this and increase that, all that stuff. So keep that in mind, especially once they start doing the budget and adjusting the tax brackets, because that definitely switched up. So make sure you're just keeping uh some general knowledge. You don't have to be an expert. Again, just have an idea, hence why this episode is just very general, because I just want to give you things to think about, things to go and ask an expert for your personal situation, because I don't know your whole income situation and all that. But just keep general tabs on the IRS and see what's going on, stay educated so that way you can make some smart financial decisions and basically protect your money, reduce your taxable income. And yeah, overall, the goal isn't to completely avoid taxes because taxes do benefit some things, but the goal is to stop overpaying because a lot of times, I mean, the IRS has all these deductions and all these credits for us to use. The problem that most of us have is that we don't have the knowledge and we don't seek out CPAs or people that have this knowledge to be able to take advantage of these. And, you know, it's very important now the way the economy is that we start understanding some of these taxes or know where to look for or know who to turn to for that help. So that way we could keep more money in our pockets because driving change for the Latino community starts with each one of us by stabilizing our own personal finances. Because I mean, and I'm just getting a little soapbox right now, but I have seen that one of the reasons that we are kind of like lacking behind on, you know, voting and all that stuff is because we're so busy surviving and you know, trying to pay bills and trying to provide for our families and trying to catch up and all that stuff. And so learning how to reduce our tax liabilities to have more money to do all those things helps us get out of that financial struggle so that way we are stabilized and now we can actually go help out our community members and go out there and fight the good fight and all that. So, but yeah, other than that, let me know what questions you may have. I will have all the references and links down below. Again, I will link the podcast episode for my other podcasts regarding real estate investing tax benefits. Definitely go check that out. And I will see you in the next one. Bye.