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How to take advantage of the tax brackets?

Updated: Feb 3


Deductions and credits.

Keep your hard-earned money in your bucket!



Deductions and credits are the keys to reducing the amount of taxes you may owe Uncle Sam.


I cannot stress enough the importance of understanding the best circumstances to fully take advantage of the tax code. This is where having a good tax advisor becomes a differentiator in wealth building.


There are multiple strategies besides the high-level concept of the standard or the itemized deductions.


Goal - Having your income taxed at a low rate


Knowing your current tax bracket is a good starting point to determine which bracket to target to keep your hard-earned money. Individual deductions may vary depending on filing status, age, disability, or dependent claim.

You can find detail information by visiting IRS at https://www.irs.gov/filing/federal-income-tax-rates-and-brackets for the brackets of single and married taxpayers for the year 2023 in the U.S.


2023 U.S. Federal Income Tax Brackets



Tax Rate

Single Taxpayer

Married Filing Jointly

10%

[$0 - $11,000]

[$0 - $22,000]

12%

[$11,001 - $44,725]

[$22,001 - $89,450]

22%

[$44,726 - $95,375]

[$89,451 - $190,750]

24%

[$95,376 – 182,100]

[$190,751 – 364,200]

32%

[$182,101 - $231,250]

[$364,201 - $462,500]

35%

[$231,251 - $578,125]

[$462,501 - $693,750]

37%

[$578,125 – and up]

[$693,750 – and up]





Credits and deductions for businesses


  • Work opportunity tax credit

  • Employee retention credit

  • Employer-provided childcare credit

  • Opportunity zones

  • Clean vehicle credits

  • Energy efficient commercial buildings deduction

  • Credit for builders or energy-efficient homes

  • Advanced energy project credit

  • Research credit

  • Deducting business expenses

  • Abusive tax shelters and transactions

  • Limitation on the deduction for business interest expense

  • Rehabilitation credit


You can get detail information on credits and deductions for businesses from the IRS article at https://www.irs.gov/credits-deductions/businesses.


Strategy - Income shifting


  • Establish a business with the proper structure.

  • Involve children and family or partners and divide ownership accordingly in consideration of the tax brackets.

  • Maintain control of the business through using trusts and other entities.

  • Ensure your books are in order so you can account for all your deductions and ensure your are aiming for a profitable business.

  • Document the transactions.


Facts and circumstances for every tax payer are unique. If you need a closer look for your case, click here to book a free discovery call to see if we are a good fit for helping you take advantage of the tax brackets.


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