For the longest time, I’ve been a proponent of paying federal income taxes. Federal income taxes among all other taxes collected are used to pay for Social Security (~23% of budget), defense and security (~16% of budget), major health programs such as Medicaid and Medicare (~25% of budget), and other social safety nets. Somebody has to pay income taxes so it might as well be us!

However, when faced with having to do my taxes, I get bummed out that it takes so long. On average, I spend around four to six hours doing my taxes because I’ve got various assets to report. It’s important that I check and recheck all my entries before filing to avoid as many mistakes as possible.

If only we could spend 30 minutes or less doing our taxes. Think about how much more productive our country would be! After six hours, then having to fork over a six-figure tax bill isn’t the most pleasant experience. It’s like getting kicked in the crotch after you’ve been kicked in the face!

Given everything is rational, I have a desire to take things down a notch by the end of the year. I would rather make less money to have more freedom and experience less stress. Tax rates are going up and social safety nets are increasing.

However, there’s still a weird part of me that feels guilty about paying less federal income taxes! It’s almost as if I have Stockholm Syndrome with the government. Therefore, I decided to interview some millionaires who feel little-to-no guilt about paying any federal income taxes at all. Maybe you are one of them and can share your perspective as well.

Seeing your property’s value go up feels good, especially if it goes up more than what you made from your day job. However, the biggest downside is your property taxes will likely go up as well.

For as long as I can remember, I’ve always stood up for myself. Whether it was getting bullied at school or getting ripped off by a vendor, you best not try to take advantage of me or else. But after three years of fighting my property taxes, I’ve given up.

This is actually my first time losing a property tax appeal. Yet, I feel it should have been the easiest property tax appeal to win.

Back in 2009, 2010, and 2011, I successfully got the city to lower my property’s assessed value so I could save on property taxes. If I had not appealed, the city would have kept charging me higher and higher property taxes during the global financial crisis.

Let me explain how this whole property tax ordeal started and some lessons learned if you also want to get your property taxes lowered. I want to save you time, money, and stress. I also want to record my experience in order to let go.

In the end, you must do a cost / benefit analysis on the property tax you could potentially save and the value of your time.

Taxes are our largest ongoing liability. As a result, it behooves us to optimize our taxes as much as possible. This post will discuss all the smart money-saving tax moves to make by year-end.

Before I had a family, my old goal was to shield as much income from taxes as legally possible. I had a goal of keeping my Adjusted Gross Income to no greater than $200,000 a year. After ~$200,000 per person, the Alternative Minimum Tax kicks in and deductions start aggressively phasing out.

Thanks to lifestyle inflation and the need to support a family of four, I’ve decided to shoot for and limit our household income up to $450,000. President Biden has clarified he won’t raise income taxes on married households making less than $450,000 and singles making less than $400,000.

However, in my opinion, the ideal household income is closer to a MAGI of $340,100 based on 2022 income tax rates. Up to $340,100, a married household’s marginal income tax rate is a reasonable 24%.

After about $200,000 per person or $400,000 for a family of up to four, I’ve noticed there is no incremental increase in happiness. Instead, making more money often creates more misery due to more work and more stress.

The marriage penalty tax has all but disappeared after the Tax Cuts and Jobs Act was passed in 2017. So if you’ve been on the fence about marrying due to a higher tax bill, you really don’t have to worry any more. It’s only married couples making over $500,000 who will likely pay more taxes together than as unmarried individuals.

The majority of actions to reduce your taxes must take place during the calendar year. So if you want to pay less taxes, it’s worth setting aside some time during the holidays and wrestle this beast to the ground.

The 2022 income tax brackets and standard deductions are out! Although the actual income tax brackets have not changed, the taxable income range per tax bracket has adjusted upward slightly to account for inflation. That’s nice of the IRS, but at the end of the day, the government still wants our money!.

Here are four charts I created for the 2022 income tax brackets for singles and for married couples. In these charts, I also include the long-term capital gains tax rates. The short-term capital gains tax rate equals the federal income tax rate.

The Tax Policy Center recently calculated most working Americans didn’t pay federal income taxes in 2020. According to the chart below, supposedly 106.8 million out of 176.2 million total income tax filers did not pay federal income taxes. That amounts to 60.6 of Americans don’t pay federal income tax!

Given there are roughly 332 million Americans, what happened to the other 156 million “tax units”? Well, the other 156 million are either children, retired, or too old to work.

Have a look at the data for yourself and tell me if you’re seeing what I’m seeing. The forecast for the percentage of Americans who pay federal income taxes increases in 2022. But we won’t know until 2023.

The Tax Policy Center also estimates that 57.1% of working Americans in 2021 won’t have to pay federal income taxes either. The reasons for the surge in non-federal income taxes payers are obviously COVID and the many tax credits the government introduced to help rescue our workers.

More than 20 million workers lost their jobs in 2020 with low-income workers hardest hit. When you add on refundable tax credits, such as the Child Tax Credit (CTC), the Earned Income Tax Credit (EITC), and stimulus checks, it’s easier to understand why 40% more working Americans in 2020 paid no federal income taxes.

ProPublica published an article highlighting how 25 of the wealthiest Americans paid a tiny fraction of their wealth in taxes. This makes sense because the type of tax that is often discussed is levied on income, not wealth. If you pay yourself a low income and never sell assets, then your tax bill won’t be high relative to your wealth.

According to Forbes, 25 of the wealthiest Americans saw their net worth rise a collective $401 billion from 2014 to 2018. They paid a total of $13.6 billion in federal income taxes in those five years based on IRS data. However, $13.6 billion only amounts to a “true tax rate” of only 3.4%.

The article goes on to say Warren Buffet is a hypocrite for encouraging the rich to pay more taxes. Yet he only paid a true tax rate of 0.1% of the wealth he garnered over the 4-year period. We all know that actions speak louder than words. Given Warren is an ultra-capitalist, his actions shouldn’t come as a surprise.

President Biden’s proposal to increase the capital gains tax from 20% to 39.6% for people making over $1 million a year sounds aggressive. Add on the Net Investment Income Tax of 3.8%, and we’re talking a total long-term capital gains tax rate of 43.4%.  

If this new long-term capital gains tax gets approved to pay for the American Families Plan, qualifying residents in California would pay a 56.7% combined state & Federal tax rate. New Jersey residents would pay 54.1%. New York residents would pay 58.2%. At the margin, people in these states with such means will relocate or find other ways to avoid taxes. 

No matter how much you make or where you stand politically, I think most people agree we should keep the majority of our income and wealth (50.1%+) given we worked for it. Do you really think it’s fair if the government gets to keep more of your money than you do? I don’t. Maybe if the government managed our money better. But the government is inefficient and sometimes corrupt.

Given only about 0.3% of Americans make more than $1 million a year, this potential capital gains tax hike won’t affect the vast majority of us directly. However, it could cause rampant selling of assets by those who are affected, which would ultimately end up hurting most investor’s portfolios.