Hello and thank you for using Just Answer,You basically would not be able to lower your SS and Medicare but if you wish to lower the tax on the state and federal amounts you should look first to having your wages reduced before they are taxed.
You can do this by enrolling first in your company's 401K or retirement plan.
The amount you have contributed is generally matched by your employer and is not included for tax on federal and state.
Medical costs that you have are most likely not enough to claim relief by itemizing on the Schedule A but if your company has a Flexible Account for medical, that money comes out pre-taxed too. You do need to make sure you only put in the true amounts you know you will spend on medical but it is a way to reduce your tax.
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thanks for your reply
So I do know about 401k, IRA, FSA, etc, but I guess I'm looking for bigger ideas.
buying a home
is one people often suggest
and maybe starting a business as some sort and deduct expenses?
When you buy a home you would be allowed the Interest and real estate taxes but you would have to know that those would be more than your standard deduction to really assist because that is on the Schedule A as well.
As far as a business, you are allowed to claim losses but only for a short while
If your business does not show a profit in 3 out of 5 years then your losses can be disallowed.
A business may be successful and if it is then you have more tax including Self Employment tax
If an activity is not for profit, losses from that activity may not be used to offset other income.
Starting a business that is not set out to earn a profit is short term tax benefit
so how much is the standard deduction again?
You are single
and how much would the home have to be (with let's assume no downpayment) to make the deduction worth it?
Your mortgage interest (not principal) and real estate taxes would need to be more than that to benefit from itemizing
Then all your other items on the Schedule (charitable and employee expenses) would be added
I see.. I'm wondering if you have any other possible ideas?
That still does not lower your withholding but could mean lower fed and state tax
I'm not worried about the withholding, but just the total amount taxed at the end of the year.
You could invest in items that may be taxable to state or federal but not both. Muni bonds
That would allow for income that is not taxable to everything
has nothing to do with wages but..........
You could also possibly look at IRA
that may allow for dedcution and lower tax but has restrictions
that brings up what is probably my last confusion
is IRA or 401k more flexible in terms of allowed cases for early withdrawal?
In a way, not for tax but to be able to withdraw yes
say, if i want to buy a house or go to grad school after a few years, how much money can I take out from each for those purposes?
(without penalty, of course)
As much as you want but only the first $10000 would not have a penalty
so if i have roth ira + trad ira + 401k, does that mean I can withdraw $10k from each, for a total of $30k?
Exceptions for Early Distributions from an IRA:
You would be taxed on IRA and 401k and Roth earnings (if less than 5 year held)
You paid for college expenses for yourself or a dependent (No limit) : oh so no limit at all for college then. That includes graduate school, right?
Yes, higher education