According to the Tax Foundation, a non-profit, non-partisan organization, Tax Freedom Day will come on April 23 in 2008. What this means is that the average American will be working through the 23rd just to pay all of their taxes. This includes both federal and state income taxes, sales and excise taxes, payroll taxes, and corporate and property taxes.
Imagine how you would feel if you had to hand over your entire paycheck until April 23. You might have a different attitude about entitlement programs, government waste, and pork barrel projects. Maybe we could get some needed changes to our tax code accomplished if we really paid attention to how much we are paying for government. I know our founding fathers would be appalled.
Since our tax code isn’t going away any time soon, it is important that we try to minimize the effects of taxes on our investments. Using tax-deferred savings accounts such as 401(k)s and IRAs can be helpful. Accounts such as the Roth IRA can help reduce taxable income in the future. Tax-free municipal bonds might be a way to reduce taxes on income depending on your tax bracket. Income from particular bond issues may be subject to state and alternative minimum taxes.
Please consult a tax advisor regarding your particular situation. Using a home equity line of credit might be a tax-saving way to finance large ticket items. You owe it to yourself to thoroughly review your tax situation and, perhaps, get some professional advice on ways to reduce your tax burden. Remember, it’s not what you make that counts, it’s what you keep!
Bob is currently host of On The Money, a weekly radio financial talk show on 97.1 FM TALK and has made guest appearances on other local radio programs as a financial professional. He has taught financial classes for adults at St. Louis Community College and hosted numerous seminars in the St. Louis area focused on retirement planning and investing.
Bob’s training includes a B.A. degree from Webster University and an M.B.A. in business from SIUE. He is a Certified Financial Planner professional and a Registered Representative with the NASD.
Bob, his wife, Beth, and their three children live in St. Charles, Missouri.