A lot of tax breaks and perks for people who earn over a certain amount have been taken away lately. However, there are still some breaks you can get if you are a six-figure earner.
- Larger tax deduction for your 401(k). If you’re an employee who is making a lot of money, you will get the most benefits if you contribute to a traditional 401(k) savings plan. You should always make sure you’re taking advantage of all of the tax breaks that are still available to you. You can avoid paying income tax on the money you add to the 401(k) plan.
- IRA charitable contributions. After you turn 70 ½ you are required to take money out of your IRA and most people have to pay income tax on the money they take out. However, if you don’t need money in your IRA, you will be able to avoid paying income tax if you donate that money to a charity.
- No Social Security tax. If you’re employed in America, you are probably paying a little bit of your paycheck each time to Social Security. If you’re earning a lot of money, however, you only pay Social Security on a small part of your salary. While you still pay Medicare tax, the little bit that goes to Social Security is no longer applicable.
- Catch-up contribution. If you’re older than 50 you are able to contribute another $6,000 to your 401(k). However, not everyone takes that advantage to catch up. If you add that amount to your 401(k), you’ll be well prepared for retirement!
Of course, it’s always best to talk with your tax professional on all personal tax matters.
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