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. It gets updated once a year to follow new tax laws.

After fake retiring in 2012, my desire to make maximum income went away. Instead, I wanted to shield as much income from taxes as legally possible. Paying six figures in taxes a year for more than a decade felt good enough. My goal was to limit total individual income to under $200,000.

After ~$200,000 per person and $250,000 per married couple, the Alternative Minimum Tax kicks in. Meanwhile, deductions start aggressively phasing out. Even in expensive San Francisco, there’s no need to make more than $200,000 a year to live a comfortable lifestyle.

Income Target And Tax Optimization After Kids

Thanks to lifestyle inflation, economic inflation, and the need to now support a family of four, I’ve got a new household income target of up to $400,000.

$400,000 is certainly not a necessary household income to live well. It’s just my ideal income level where you earn enough to do what you want, but aren’t getting crushed by taxes.

A 25% – 30% effective tax rate is high enough to feel like you’re contributing to society. But it’s also not so high where you’re feeling robbed by the government.

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.

For hardcore tax optimizers, the ideal household income may be 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%.

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 time to get cracking.

For the first time in my life, I accidentally paid my estimated taxes twice. If you ever do the same, I want to share with you what happens next and when you’ll get your overpayment back.

Bottom line: Don’t worry too much. You’ll eventually get your money back within six weeks.

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.

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.