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!