Understanding Your Taxes: The Basics

Taxes can be complex and confusing, but it's important to understand them so you can pay the correct amount and take advantage of all the deductions and credits you're eligible for. In this episode, we'll cover everything you need to know about your taxes, from the basics to more advanced strategies.

Topics covered:

• What are the different types of taxes?
• How are taxes calculated?
• What are deductions and credits?
• What is the standard deduction?
• What are itemized deductions?
• What are popular tax credits?
• What are income phaseouts?
• How to calculate your marginal and effective tax rates
• How are bonuses and stock options taxed?

https://www.techbychoice.org/donate

https://www.levelupfinancialplanning.com/getting-those-big-tech-checks-with-tech-by-choice/

https://the-collab-lab.codes/

https://www.levelupfinancialplanning.com/a-co-founders-journey-to-starting-the-collab-lab/

https://www.levelupfinancialplanning.com/wp-content/uploads/2023/01/Important-Numbers-2023-1.pdf

Transcript

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SPEAKER_02 0:00

Yeah, if you're in the third two percent bracket, like yes, yes, you are seeing a lot of taxes being withheld, but luckily you're not paying 2% on everything. It's actually a good thing that we have a progressive tech trade system and it it does make it more maneuverable too from tax planning.

SPEAKER_03 0:14

This is techie personal finance bootcamp where I help tech professionals in their 20s and 30s balance a great life today without sacrificing their future possibilities. I'm your host, Lucas Caceres, certified financial planner and founder of Level Up Financial Planning, where I help educate, coach, and build strategies with my clients to help them take their financial confidence to the next level.

SPEAKER_04 0:43

First consult with your financial advisor, because that's way more legit. That's it.

SPEAKER_03 0:47

That was Orlando Gomez, and you can catch him in season three, episode four on how he broke into tech by writing a jingle.

SPEAKER_02 0:55

Hello, thanks for joining me today for this special series for Techie Personal Finance Boot Camp. And we're heading into the holidays. It is November 1st as of this recording. So end of the year, you think of Thanksgiving, holidays, things like that, things to be thankful for. Hopefully, you've had an awesome year, and we're just kind of putting the final bow on uh an amazing year. If it hasn't been quite the year you're hoping for, uh kind of one of the beaties with the new year being right around the corner. We can kind of start fresh, and and so you don't have to wait till new year. And so before we get started, you may have seen that I had initially planned to do live events for this series with paid donations to a nonprofit of your choice. I wasn't the best at promoting it and decided to only go with the recorded versions, but I still highly encourage you to get back to charity if you found value in the series. And if you don't have a particular charity in mind, I'd like to call attention to a few nonprofits I'm a fan of because I know the individuals who are putting in the work and I've seen the real impact that they made. I'm also excited to announce that these nonprofits are going to be nonprofit sponsors of Technique Personal Finance Bootcamp moving forward. They are Tech by Choice and the Collab Lab. You can find out more about them by listening to their episode or by using the link in the show notes. So, with that said, another thing that comes around towards the end of the year that I get super excited about is end-of-year tax planning. And so this is perfect to give you the basics today. This is a part of a series, so there's gonna be a lot more to come. So we're gonna talk about the basics of uh your taxes uh for 2023. Everything's gonna be tied very specifically to the numbers that we know and are aware of for 2023 for anyone that's trying to do that end-of-year tax planning along with me and and my clients. Uh, but also just know that most of the stuff does carry you over, right? Uh the tax brackets don't change dramatically unless there's major tax law changes, which could happen. Uh, but what tends to happen is things get increased for inflation, most of the things we talk about will just be moved slightly. So should still all be relevant, should allow you to have a good understanding not only of how your taxes work today, but also in 2024, 2025, and moving forward. And and there will definitely be some things that might not apply to you. That won't be as much in today's event since we are covering the basics. These things you've either heard of or seen in some capacity for most of this stuff. As we move on to the other series where we're talking about more advanced details on retirement plan, employer stock, charitable given, different tax strategies to control your taxes. Those things might be a little bit deeper and they definitely might not all apply to you. But I do encourage you to find out about them because uh what happens is you're gonna be so busy, you're and and I'm sure you're already so busy that something might come up and you might not even realize, like, oh, there's an opportunity here. And so one of the things that I've always done is just get super educated, and even if it's not relevant, it's always in the back of my head so that when I do see that kind of instance where, like, oh dang, this this matches up with something I heard. I need to go back, touch, touch based on it, but you already are aware of what's possible. And then you just need to dive deeper and make sure that it's applicable to you at that point in time. So with that said, we can definitely dive into today's event. This is available as video as well as podcasts, and and I'm gonna break these things up too. So if you're just started listening, one of the cool things about it being on demand and not live is you can fast forward, you can play it fast at two times speed, you can slow this down and do whatever you need to. What I'm sharing here for the video folks is the disclosures. And basically what it says is hey, this is just information to help make sure that you're more educated, more informed. Definitely don't take it as specific advice to you because your situation can be dramatically different, and and I just don't have insights on your specific situation unless you're a client. Then obviously, you have questions, reach out and and I'll be able to answer those a lot easier than I would be a little a complete stranger. Benjamin Franklin said, in this world, nothing can be said to be certain except debts and taxes, and that's it's been the case for a very long time, right? Ever ever since uh there were people that needed uh ruling and people that needed help with kind of building up communities and things like that. Well, how are we gonna pay for all these things? Well, taxes is one of the ways, and and yeah, maybe the taxes aren't used the most efficient way. I'm not in here to get into a legal debate as far as whether taxes are ethical, but uh they do have a purpose, and the primary purpose is to kind of provide the foundation uh for a lot of the things that people normally wouldn't pay their own money for to uh build bridges, fix roads, uh different things like that, create libraries, fund the police department, all these different things usually are covered by taxes, and it's gonna vary by municipality and states and things like that, but ultimately that's what taxes do. So we're gonna be able to answer a lot of questions that maybe you've had, and and maybe you didn't, but I'm gonna give you some information and you'll be able to answer these questions more confidently. So, what types of taxes are there? What is your marginal rate, and what's your effective tax rate? Because those things are different, and we'll go into the calculations. What are my tax deductions? Super important to be aware of those because uh maybe it maybe you have deductions you're not even aware of and you're not taking advantage of. I do see that from time to time when I start working with new clients. What are your tax credits? Tax credits, those ones are tend to be a little bit more obvious, definitely tend to be a little bit more valuable, and we'll dive into those more specifically later. What taxes do you pay on your investments? So super popular one I'm always addressing with clients. How are my bonuses and stock options tax? Again, just this is this is just like every day for me, all these different things. And and I actually did answer this just today. Actually, are you withholding enough on taxes? And can you control your taxes? So those things are all important details. And the nice news is like, yeah, we can definitely control these. It takes a requirement of understanding how it works in order to control it. So we'll dive into all of that. But first up, why the heck are taxes so confusing? So one problem is there's are a bunch of them, right? There's federal income taxes, there's social security taxes, Medicare taxes, capital gain taxes, state income taxes if you're in a state that has that. Technically, there's sales taxes in a lot of places. There's alternative minimum tax, also called AMT. So there's all these different taxes. And if that wasn't confusing enough, the one that we're gonna focus on specifically is gonna be the one that you can control a little bit more, is gonna be the federal income taxes. So everything to do with the federal income side. We're not gonna dive into states because that varies too much. Social Security and Medicare, those kind of do what they do, and there's not too much maneuvering around there. So let's dive into federal taxes. One of the things that makes federal taxes itself even confusing is because we have a progressive tax rate system. So if you're in a 24% tax bracket, luckily you're not paying 24% on all of your income. We'll dive into the other brackets and how to kind of figure out well, what what does that mean? But essentially, as a progressive tax rate system, is you pay a little bit in taxes on income at different bracket levels. So the technically you pay at 0% for a portion, you pay at 10%, you pay at 12%. The higher income you earn, the more brackets you start to fill up, and those things get averaged out. So that's what makes it progressive. And so it's good to know that, hey, yeah, if you're in the 32% bracket, like yes, yes, you are seeing a lot of taxes being withheld, but luckily you're not paying uh 32% on everything. So it's actually a good thing that we have a progressive tax rate system, and it it does make it more maneuverable too from tax planning standpoint. So here's actually a snapshot of all the tax brackets of for those listening on the podcast side, so the federal tax rates, I'm gonna go over these again. So 10%, 12%, 22%, 24%, 32%, 35%, and 37%. And so what's interesting is at those brackets get filled up with different types of income. And for a single individual, that 10% bracket is zero to $11,000, is you'll pay 10% on that. So that's $1,100 there, and so on and so forth. And so as you move down the line for the tax brackets, there's a chunk of income that gets captured and gets taxed at that tax rate only. Any income above that, you start to bump into that next tax bracket. So here we'll take a look at what your marginal tax rate is. And so marginal tax rate that is the highest tax rate that you pay on your last tax dollar. And so in this example, we're looking at uh married filing jointly. So that's what the MFJ stands for. Whether you're looking at this video now or looking at uh my cheat sheet that I'll uh provide in the show notes that you can access, and it breaks down the tax brackets for married filing jointly. In this example, we have taxable income of $190,751, and that has a marginal tax rate of 24%. So if we look at this chart, we see that the 24% tax bracket actually occurs when you cross $197,750. So it actually only crosses it by a dollar. So a dollar gets taxed at 24%. The previous dollar before that was only taxed at 22%. And so that's just a quick glimpse as far as why that's the marginal tax rate, because technically they did go into that, and that last dollar they earned, they're paying 24% there. The previous dollar, they're only paying 22% out. So marginal tax rate means that is the highest tax rate that you pay on the last dollar that you're taxed on. And so, how is that different from the effective tax rate? The effective tax rate is actually more important, and so the effective tax rate is the average taxes paid across the total of your income. And so, if we use kind of that same example, well, taxable income of $197,751 actually is a total income of $218,451 because of what's called the standard deduction, and we'll go into that here in a second. And so even though they're only taxed on $190,751, technically their total income was $218,451. And so if we look at what their effective tax rate, it actually blends that 10%, the 12%, the 22%, and 24%. And I'll show you the math on the next slide here. But what that averages to is 14.91%. So even though they're in the 24% marginal tax rate, that's that highest tax bracket they're in, they're only paying 14.91% on all their income earned. And so that would be their effective tax rate there. And so again, for people listening on the podcast and not watching this on the video, I have kind of uh an Excel spreadsheet where I kind of broke out and did the math. So the 0% tax bracket, that's their standard deduction that they get. $27,700, that's free money, free income that's you're not taxed on it at all. So that's at the 0% tax rate. You pay $0 in federal taxes. The next bracket that you start to fill up is the 10%. And this is for a married filing jointly example, just uh so you're aware, but that has $22,000 that you can stuff into that 10% bracket. 10% of that is $2,200, and they have more income than that. So we keep moving down the spectrum until we get to their total income of $218,450. So the next bracket is 12%, $67,449 of their income is able to fit in there, and that tax is $8,094. The next tax bracket is 22%. They fill up that one as well. That one's able, we're able to stuff $100, $1,300, and that tax is $22,286. Then we remember the 24% tax bracket, and they only went over by $1. So $1 is in there. And just because of what happens with rounding in Excel, technically $0.24 is due on that because of that 24% tax break that's below 0.5. So it rounded it down to zero. It's basically the zero taxes on that dollar earned. But we do know that it's actually 24 cents. So all in all, they had $218,450 of income. Of that, only $32,580 was the amount they pay in taxes. That gives them their effective tax rate of 14.91%. So this is an example, but you can kind of back in and kind of rebuild your own income. You can fill up these tax brackets and find out, well, what is your effective tax rate? Sometimes either your tax preparer or if you use turbo tax, sometimes this is somewhere on your tax return as well. So you might not even have to do the calculations for the previous years. But if your income's changed substantially, yeah, you probably want to run uh through this and see where you stand today. So that 0% tax break, I kind of let the can out of the bag a little bit, but what the heck? 0% tax? Like I'm sure most of the people the same didn't realize that there is a chunk of your income, a pretty decent chunk, that you pay 0% uh that is going to be your standard deduction. And now a quick message from our nonprofit sponsor, tech by choice.

SPEAKER_00 15:07

Tech by choice is a nonprofit that's focused on helping underrepresented groups understand thrive in tech. Our main goal is to be a community that you don't need a code switch in in order to learn what you need to thrive in tech. And so we do workshops for skill building, we talk about financial literacy, we also talk about mental health and what to do if you run into discrimination in the workplace. Any donations, if you go to techbychoice.org/slash donate, you'll get all of the details on how you can give to the organization. Things as little as like five dollars really help us go. The other way that you can get involved and help tech by choice is to volunteer. We are always looking for mentors and we're looking for people to help out with some of our resume review events and just supporting the community by even joining and answering questions in our Slack is always really helpful. And then if you have any connections for us to get those sponsorship deals and connect with larger companies and get out there in the tech streets, I'm always open to that as well. So there's a lot of different ways to help.

SPEAKER_02 16:17

With that, we we can dive more specifically because there's there's other stuff to go on with deductions, right? There's uh not just the standard deductions, there's something called itemized deductions. We have tax credits, and and these are all different incentives that help you reduce your taxes. They do it a little bit differently, and I'll go into why, but we we already know about the standard deduction. We looked at specifically the joint filing, the married filing jointly. But if you're an individual, your standard deduction is half. It's $13,850 for an individual. If you happen to be age 65 or older, or maybe you have parents or grandparents that are 65 or older, they get an extra $1,500 for their standard deduction. So when you're filing your taxes, what you end up deciding on is well, should I take the standard deduction? Most people, the standard deduction is actually better than itemizing, but uh there are a few instances where itemizing your deductions will save you thousands of dollars in taxes. So you definitely want to take a look at it. One of the things that hurts with itemizing your deductions, they changed the tax law back around 2017, where they said, hey, you can use in your itemized deductions calculations your state and local taxes. So that's state income taxes, that's property taxes, that's taxes you may pay on your vehicle registration. And they capped that at $10,000. And so if you're in California, if you're in New York, if you're in any state that has high property taxes or high income taxes, and you make a high income, there's a good chance that maybe you have $30,000 of state and local taxes, but it's capped at $10,000. So you're not even able to recognize $20,000 of that that could have been an itemized deduction. So that's unfortunate. And that's one of the reasons why so many people just automatically fall into standard deduction. You lose out on so many of those itemized deductions that used to be allowed, but now there's that cap at $10,000 there. But some things that are not capped as aggressively is gonna be home mortgage interest rate with interest rates where they are today, anyone with a newer mortgage with a uh fairly high balance uh being owed, you're gonna have such such a high amount being paid to interest that might be worth looking and seeing, like, hey, if once I add the same, once I add it to the state and local taxes, doesn't make more sense to itemize. And basically, all it comes down to is you add all these things up. And if your itemized deductions is higher than the standard deduction, you take the itemized one. Sometimes if we have it where we look at it and it's like, oh, your itemized deductions is $200 of income better, and it only amounts to like $40 of tax savings. Well, we already did the work, let's let's save the $40 on taxes. So you can run all these numbers. Other popular common itemized deductions would be charitable contributions and medical expenses. So just be aware of that when you're looking at it. If you're answering questions about how much mortgage interest did you have, well, if you have a significant amount of mortgage interest, that's very possible you could be itemizing. So there's also standalone deductions. And so that's one interesting thing about all the deductions stock, right? There's the standard deduction or itemized. That's one choice. It's this or that. But then there's other deductions that you can do on top of those things. If you pay tuition and have student loan interest, like those things are deductions that you could possibly reduce your income. IRA contributions, Roth contributions do not count as deductions because it doesn't reduce your income. We'll dive into that deeper in the next conversation for the next event. HSA contributions, so that's the house savings accounts, flexible spending account contributions, those things all reduce your income and are considered deductions. There's also credits. So credits are very cool. One of the downsides is if you are a high income earner, they do have income limits and they're all over the place. So there's different income limits depending on what you're doing, what tax credit you're looking at. But there's the education credits, so those are pretty valuable unless you're phased out. If you're going to be attending school, if you have a child attendance school, there's child tax credit. Again, you got to be aware of the income limit. So if you have multiple, multiple children like I do, and and you're about to slightly creep over that income phase out limit. Well, is there a way you can move below that? And in my case, we would get $8,000 in tax credits if we stay below the income phase out. But if we go a dollar over the income phase out, well, then we lose $8,000 in child tax credits. So something to be aware of as your income grows over the years and throughout your career, especially if you have children that are still eligible for those child tax credits. There's the child independent care credits, there's earned income credit, earned income credit will be on the lower income earning year. So if you just happen to be laid off or maybe you're starting a business, your income's lower. There's something called earned income credit that's you may qualify. Anyone that's working full-time, especially if you're in tech, like you're not going to ever touch that earned income credit. And you'll never see or hear about it, probably. There's also some cool things around energy credits, specifically vehicles, energy efficient. There's the rules are a lot tagless now, so be aware of that, but still could be valuable if it matches up with what you're looking to buy, anyways. Then there's some house energy credits too. So if you uh improve your home, they might be eligible for energy credits. So be On the lookout for those things. If you've made those changes, make sure that you uh either message your tax person or jot down a note, like, hey, when I do my taxes, I need to see if this applies for tax credits. So we talked a lot about deductions and credits. Which one is better? And luckily, you don't have to decide. This isn't like the standard deduction or itemized deduction trade-off where you have to pick one. You can have deductions and you can have credits. These things are different enough, or it's not you're choosing one or the other. The thing that makes deductions less valuable. So I have the less than symbol uh here when I'm kind of comparing these things left and right. So the deductions on the left technically are less valuable than the credits, and that's just because of how it works. So deductions reduce your taxable income in your taxable income. So if we reduce your taxable income, the taxes are just a portion of that. On the credit side, the credits are going to be exact dollar amounts, tax savings. So it reduces your taxes. Here's uh a quick example. So someone that makes $100,000, they have a $2,000 deduction. Well, that brings your taxable income to $98,000. They're in that marginal tax rate of 22%, which means for that $2,000 that they're reducing their income, they're saving $440. That's awesome. Great tax savings, but the credits are better. So if someone has taxable income of $100,000, so same exact thing, but instead of a deduction, they receive a $2,000 credit. Well, then their tax savings is $2,000. So the credit's $2,000. So the tax savings $2,000. So when you look at those numbers, the tax credits are going to be more valuable for sure. So another popular question is how are my investment tax? And those things vary substantially depending on what investments are we talking about, where are these things located? And so a common one that I'm happy to address really quickly is well, retirement accounts. Any gains, any sales with inside your retirement accounts, they're protected by that retirement packaging. And so you can buy and sell and trade and make as much money in there as you want. And you're not going to be taxed until it's withdrawn. Roths, again, are a little bit different. So when you withdraw from Roth accounts, those are going to be tax-free as long as you followed all the rules required of withdrawals there. But yeah, retirement accounts, yeah, you can make tons of money and buy and sell and trade those things and not have to worry about a tax bill showing up uh next tax season. Savings accounts, now that there's high interest savings accounts popping up and they're kind of everywhere now, especially CDs and things like that, you can probably easily get anywhere between like four and five and a half, six percent for either savings account or CD. And if you have a lot of money parking in a savings account or CD, that can generate a lot of income. And so it does count as ordinary income tax. And so whatever tax bracket you're in for that marginal tax rate, any additional income you generate from those, it's gonna fall into those. So just be aware of it. Don't be shocked. If you make $10,000 of interest and you're in the 22% tax bracket, well, that's gonna be $2,200 that you're gonna be uh paying for that. So just be aware taxes are brutal, but once you know and are aware of them, then you don't have to be caught off guard or surprise. Rentals are a wildly different animal, but they would be ultimately taxed at ordinary income tax. The nice thing about rentals is, well, there's expenses that you might have, like property taxes and insurance, different things that you may pay and cover for your tenants. Those things count as expenses, and you get to depreciate the property. So between those things, you reduce the income, but then whatever net positive income you do end up paying at the ordinary income tax as well. So what where it does start to get a little bit different is with non-retirement accounts. So non-retirement accounts, qualified dividends, and long-term capital gains will receive special tax treatment. So they'll actually allow you to get a way better tax rate than what your normal tax break would be. One thing to be aware of is if you have non-qualified dividends or short-term capital gains, that also would fall into ordinary income tax. But yeah, once you hold on to those things a certain amount of time, then they qualify, and that time frame is one year, and it's it's one year and a day is long term. So it's gotta be greater than one year. If it's less than, then you're gonna be paying ordinary income tax on whatever gains those are. And so it's pretty, pretty easy to calculate. It's nice because where most people end up falling, it's gonna be the 15% tax rate. If your income happens to be lower, and this could be again opportunity if you're in a lower income year due to layoffs or something funky, or just making a career change, taking a sabbatical, whatever it is, if your income happens to fall in that 0% range and you have tons of gains in your investments, well, there's a portion you could probably sell and pay 0% on the gains there. So technically, there is a 0% capital gains tax rate. Your income does have to be lower in order to qualify in there. Then there's the 15% tax rate, and that is huge. So I use the mirror filing jointly as an example. Anyone with income between $89,251, so above that to $553,850, any capital gains that are long-term will be 15%. So $50 to be better than the 22, 24, 32% tax bracket that you might be in for the marginal rate. So that's why capital gains is such a huge savings for people that are able to build investments and be taxed at capital gains rates rather than their larger marginal tax rates. What about losses? So the last couple years have been a little bit bumpy with the stock market. So losses are very possible. And so one important thing to know about losses is well, first they're gonna offset your capital gain. So if you sell this thing at a loss, but you have something else that you sell at a gain, those things will wash out. And if there's any excess amount of losses above that, then you can actually reduce your income by $3,000 per year. So what Dan thinks about that is if you have a $30,000 loss and you're only able to recognize $3,000 of that per year, it's gonna take a while for you to use up all those losses, but they won't disappear on you. You're able to carry those things on forward, and and it will save you uh quite a bit of money over time as you're able to kind of use those losses and carry them forward. There's also, for that very reason, a strategy called tax loss harvesting, and it could be pretty meaningful because what it allows you to do is you can essentially sell the equivalent of the same asset. So let's say you're having a diversified SP 500 bund and you sell it because it went down, you want to recognize that tax savings, and you lock it in at a lower amount, you get the tax savings, and then keep moving forward, if you were to sell at a gain, well, we we're only paying 15% on a long-term capital gain. Uh, so you're you're able to reduce your income maybe at 22, maybe at 24%, maybe at 32%. And and so the difference there between your tax bracket and what the capital gains rate is really what you end up saving on the long term. So again, that could be half, half the tax savings if you are able to maneuver those things and make them play out right. And now a quick message from our nonprofit sponsor, the collab lab.

SPEAKER_01 29:49

The collab lab exists to help early career developers break into tech, kind of gain their footholds, to get that first job, and especially people from underrepresented backgrounds. The thing that's really hard to simulate is actually working on a software team. We set up these projects for people on Teams. Everything they're supposed to do is all mapped out for them. So it's really structured. It just lets them come in and focus on learning things like pair programming, writing pull requests, and doing code reviews, merging code, demoing their work to help. So it's a bunch of ways. Our operating costs are covered by donations. We rely on word of mouth for marketing. If there are people who are listening to this or know people who they think would make a good team mentor, we'd love for them to get in touch with us.

SPEAKER_02 30:34

End of year also calls commonly for bonuses and potentially stock rewards and things like that. And so, how are those things taxed? And the federal rate that's usually required by most employers is 22%. If it's not being withheld at 22%, you'll definitely want to keep an eye on it. I did have a client one time where they sent me over their stuff. And even though things were perfectly fine one year and they were at the same employer, it just kind of flipped, and all of a sudden they were having nothing withheld, and and that uh created a bunch of problems for uh her employer and and everyone else that she worked with, because they were doing it for everyone across the board for their bonuses. And so make sure 22% federal taxes is being withheld. You'll also have state taxes as well if you're in a state that taxes uh your income. And so just be aware of that, and sometimes that's not all you pay because there's still Social Security, there's still Medicare, then taxes. So typically what uh you end up seeing is about 60% of that. You get a $10,000 bonus, you're gonna see about $6,000 net hit your bank account after that. All those taxes are withheld. But if your marginal tax rate is higher, so if you're in the 32% tax bracket and you're only paying 22% on those bonuses or those stock options that you exercise, well, there's a 10% difference there. And so you're probably gonna underwithheld for that time period because we know that it's not being withheld at that 32%. And so, how do we know if you're withholding enough? You can definitely run the estimates, and I'll give you a link to that here in a second. But here's a couple of the common reasons why you might be underwithholding. So bonuses and employer stock is a big one. Maybe your tax credits reduce. I have a couple clients where uh their children are getting older, and so now they're 18 and 19, and they no longer qualify for the $2,000 tax credit. They might get a dependent tax credit of $500, but that's very different. And so if they were used to getting a little bit back when they filed their taxes as a refund, it's very possible that all of a sudden they're oh, or maybe they just get less. And so that's one reason that you might be under withholding. Also, one of the things with mortgages, it's kind of a nice thing, but it doesn't help with your itemized deductions. Is every year you're paying off less and less interest and more and more principal, and it's the interest that you're able to itemize. So if you've been itemizing your deductions and your mortgage is being paid down faster, then it's very possible that well, you know what? At some point, your standard deduction will be better than the itemized deductions, just because the standard deduction goes up for inflation a little bit each year, and your mortgage interest rate is coming down each year, typically. Another key reason would be a change of salary. Definitely if if you have uh job change, employment change, tax withholding just might be switched up from what it was being previously. Or if you have a spouse or significant other that jumped into the workforce after being out, staying at home with the kids, taking sabbatical or whatever. So all these changes could definitely influence whether you're withholding enough in taxes. And so this is what I use for my clients, and it's gotten a lot easier to use these days. It's the IRS withholding estimator. You just go to the IRS.gov website, look for their withholding estimator, and you know, ask your information. You got to kind of pull your most recent pay stuff to kind of hunt down this information, but it'll ask for how much income you made, how much do you have withheld in federal taxes, do you contribute to retirement accounts? Do you pay for health insurance? All these different things impact your taxes. And so it'll ask you to fill those things in using your most recent pay stupid, and then it'll project out for the rest of the year whether or not you're on track. Then, and if you're not on track, it'll give you the option to rerun your W force, which is the form that you use with your employer, to update your tax withholding, and it will pre-fill that stuff for you. So definitely a handy tool, especially if you feel like, hey, I do have some of those changes. I might not be on track. Definitely check that out. And yeah, there's probably not much you can do with the last month, two months here, but being aware of it can definitely help kind of reduce some of the freak out that might occur come tax season. And you can also get started come January to just kind of be on a better path with your tax withholding as well, if you're aware of that today. If you're an existing client, there's a good chance I've already run those for you. But if you're not sure if I have or if you haven't sent me a paste up from the last few months, go ahead and send that over. I'm always happy to run those because I I do like making sure no one's surprised come tax season. So there's a ton of different ways you can control your taxes. I kind of put them in a different category. So you can reduce your taxes, you can make moves that are tax neutral, doesn't necessarily increase your taxes, doesn't reduce your taxes this year. Uh, but most likely we're doing that because of something that will save you in the future. Uh, we can also offset taxes. So an example, and and I'll get into more of these strategies in the future uh series, uh, is you can exercise stock options and it'll recognize income. But we can use those funds and actually contribute to an 401k account and max that out and reduce your income. So we can kind of move these things around and say maybe you didn't want the risk associated with your employer stock, and we can be more diversified and not have to pay any taxes and just move it into a retirement account and make those things tax neutral uh or offset each other, uh, basically. Uh, we can do things from a tax efficiency standpoint, and we can pay taxes now to avoid them in the future. So those are kind of the categorical ways. Uh, then there's 15 ways all kind of tucked into there. And just some of the types of things that you'd be looking at would be retirement contributions, what types of retirement accounts, health savings accounts, flexible spend accounts, employer stock is a big tool. You can kind of use to maneuver those, uh, non-retirement investments, and charitable contributions. So, some of the next workshops that you'll be seeing coming out from me is going to be uh focusing specifically on retirement accounts. We're gonna dive into something that's a little bit more advanced called uh backdoor ROS and mega backdoor ROS. Uh, we'll go into a lot of different retirement strategies there. Uh, then for the final event, it'll be the employer equity and charitable given strategies. So never pay more in taxes than you need to. Let's let's make sure that we're doing things the strategic and smart way of doing it and uh not paying more than you need. If you're not familiar with me, definitely visit my website. I have I have two actually, I have the financial planning website, I have the power up tax planning website, and you can contact me by email or uh connect with me on social media and we can kind of uh connect that way as well. But look forward to hearing from you. Let me know if you have any questions, if you have any uh specific scenarios that seem a little bit complex. I can see if I can send you over some additional resources. Thanks for joining me today, and yeah, hope you're able to catch the next one. And and if you are in a position to give back to a charity, definitely consider giving back to one of the ones I mentioned or one that's very important to you. Nonprofit sponsors were provided ad space at no charge. I think they're awesome and wanted to provide them a platform to spread awareness about the great work that they do.

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