If you’ve been following us at all, you already know that here at CQ Consulting Services, we take a non-conventional approach to financial planning. Our main focus is not just on accumulating more wealth but also on keeping more of it. Robert Kiyosaki always says, “It’s not how much you make, but what you KEEP that really makes the difference.” We see it all the time. One key aspect of this strategy is understanding how to mitigate your tax liability by reducing your Adjusted Gross Income (AGI). Lowering your AGI can significantly decrease your tax burden and increase your overall financial stability. Taxes are one of the biggest enemies of wealth. It has been said that tax is the biggest challenge to achieving financial freedom. Today, we will share five conventional strategies to help you legally mitigate your tax liability and reduce your AGI.
1. Maximize Retirement Contributions
Sure, contributing to tax-advantaged retirement accounts like a 401(k) or Traditional IRA can lower your AGI. But let’s be real, these were designed to placate high-income earners, not necessarily to set you up for a golden retirement. The contribution limits for 2024 are $23,000 (or $30,500 if you're 50 or older) for a 401(k) and $7,000 (or $8,000 if you're 50 or older) for a Traditional IRA. It’s like they’re throwing us a bone, expecting us to be grateful for these scraps. Don’t get me wrong, it’s better than nothing, but let’s not pretend it’s the ultimate solution. Remember back in the day when people had pensions? Anyway, I could go down a rabbit hole on that one. I digress.
Let's get back to how we can use the tax code to our benefit this year.
2. Utilize Health Savings Accounts (HSAs)
HSAs are often touted as a triple tax advantage: contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are also tax-free. Contribution limits for 2024 are $4,150 for individuals and $8,300 for families, with an additional $1,000 for those aged 55 and older. While it sounds great on paper, the reality is these limits are fairly small. It’s a tiny band-aid on a much bigger tax wound, but hey, every little bit helps, right?
3. Take Advantage of Tax Loss Harvesting
Tax loss harvesting involves selling investments that have lost value to offset gains from other investments. This can help reduce your taxable income and AGI. You can offset up to $4,150 of ordinary income per year, with any additional losses carried forward to future years. This is another so-called strategy that feels like a consolation prize, which is useful but hardly revolutionary. It requires careful planning and timing, and while it’s worth doing, don’t expect it to change your financial life overnight.
4. Invest in Tax-Deferred Annuities
Tax-deferred annuities allow your investments to grow without being subject to immediate taxation, with earnings taxed only upon withdrawal. This can help lower your current AGI, but the idea that you’ll be in a lower tax bracket in retirement is wishful thinking for many. Deferred taxes can be a decent strategy if you’re smart about it, but don’t rely solely on this one strategy.
5. Make Charitable Contributions
If used correctly, this is one of my favorite tax strategies. Of course, you need to be a charitable person to love this one. Donating to charity is a noble way to give back to the community and can also help lower your AGI. Charitable contributions can be deducted from your taxable income, reducing your overall tax liability.
Qualified Charities: Ensure that you donate to IRS-recognized charitable organizations.
Donation Limits: Generally, you can deduct up to 60% of your AGI, but certain donations may be subject to lower limits.
Consider donating appreciated securities, which allows you to avoid capital gains taxes and still receive a deduction for the full market value of the asset.
This tax savings strategy is impressive when compared to other so-called 'strategies.' It alone can reduce your taxes by 60%. Our legal and tax team has developed the 'Donate, Deploy, and Deduct' strategy, utilizing advanced techniques that are by far the best-kept secret we've discovered yet.
By utilizing this one ADVANCED strategy our clients have kept millions of dollars in their pockets and simultaneously made a huge impact on causes they care about!
Crafting a Personalized Financial Plan
At CQ Consulting Services, we understand that every individual's financial situation is unique. Our non-traditional approach involves crafting personalized strategies that align with your specific goals and circumstances. Reducing your AGI is just one piece of the puzzle. Let us help you explore tax strategies tailored to your situation. Contact CQ Consulting Services today to schedule your complimentary consultation. Together, we can create a plan that ensures your wealth is protected and optimized for your long-term goals.
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