Early in my career, I used to go to an accountant when it came to filing taxes. Not knowing exactly what everything meant that was being filed, I was pretty naïve when it came to this. I was only concerned whether or not I was getting a refund or not. One year, I remember my accountant giving me advice that I couldn’t relate to because I was financially illiterate. She told me to do 4 things to help me financially for tax benefit reasons. Of these 4, I’m doing 3 and working on the 4th which I wish I started long time ago.
1. Buy A House
Buying a house is a huge commitment but comes with many benefits. You are owning an asset that typically appreciates. Plus you get real estate tax deductions! Your deduction of state and local income, sales, and property taxes is limited to a combined total deduction of $10,000 ($5,000 if married filing separately). I have owned my own house since 2003 and have been able to leverage this tax deduction.
2. Get Married
Not only is getting married one of the best moments of your life. It’s also a financial benefit. Filing together as a married couple can get you more deductions and other tax benefits. TurboxTax has an article on the 7 Tax Advantages Of Getting Married.
3. Have Children
Children are our future and they also come with tax advantages. For each child, you receive a child tax credit and you can receive the child and dependent care credit. TurboTax has a nice article on this. This means that for each child or dependent you have, you can receive tax credits for them. Does this mean you have as many children as possible? Probably not, but if you like big families, you increase the number of credits you’ll receive.
4. Start A Business
This is the one area I wish I started long ago but I’m working towards this. I’ve learned a lot about financials and taxes that I understand why my accountant told me this. I wrote in a previous post the 3 types of income and one of the income types is business income. There are advantages of starting a business such as the ability to write off expenses (legitimate business expenses of course) and lower tax rates on business income. These days, starting a business seems much easier with the internet so accessible than 20 years ago when my accountant first told me this advice. If you have a passion that you want to monetize on, go for it!
The advice I received from my accountant, which was over 20 years ago, still applies today. Buying a house, getting married, having children, and starting a business all have their financial tax benefits. Knowing what I know now, I can appreciate the advice and understand exactly why she told me this. Understanding the financial area is difficult but the better you grasp it, the better position you’ll make yourself with your goal to financial independence. If you are interested in following my journey, email subscribe to get alerts of latest posts or follow me on Facebook.