Showing posts with label talk to your accountant. Show all posts
Showing posts with label talk to your accountant. Show all posts

Monday, September 5, 2016

Are There Really Loopholes in Tax Laws?

If you think that United States tax law is 100% perfect and doesn’t have any problems or loopholes, then you might want to think again. There are actually quite a few loopholes within the tax law, and the IRS and the government as a whole are aware of these loopholes. They haven’t yet closed some of them, though, because...well...some loopholes can actually be beneficial to some people. While there’s no telling whether these loopholes will exist in the future, the fact of the matter is that you might as well take advantage of loopholes that apply to you while you can.   

Carried Interest Loopholes

This first loophole, known as the carried interest loophole, isn’t beneficial to everybody, but there certainly are some people they can help big-time, including venture capitalists, hedge fund managers, private equity firm partners, and more.

Basically, through this loophole, your compensation can be taxed at a lower rate than regular income tax. This loophole, which charges these specific professionals at the long-term capital gains rate, which is a reduced rate from the regular income tax rate, can really help the wealthy to stay wealthy while still accumulating even more money, which is why some people deem it as controversial and unfair. Regardless of how you feel about the issue, if you fall into one of these job descriptions, enjoy it while it lasts!

Deductible IRA Contributions

This second loophole will probably apply to a much larger amount of people than the first. Basically, if you have a 401(k) and you choose to fund it out of your own pocket, i.e. with pre-tax dollars, that will automatically reduce your taxable income amount, which means that you’ll pay less in taxes. In other words, you avoid paying taxes on the money you put into your retirement account, so the more money you put in, the more you save on taxes. Simple, right?

The Saver’s Credit

Have you recently started a savings account? If so, the IRS will reward you for this via what’s known as the “Saver’s Tax Credit.” Basically, you won’t have to pay taxes on some or, in some cases, even all of the money you’ve saved. That’s a pretty great reward for doing something you should already be doing anyway.


To learn more about these and other tax loopholes and to see which ones you may qualify for, talk to your accountant or tax preparer about finding loopholes that apply to you!