A tax loophole is a provision that allows taxpayers to avoid paying tax on some of their income. In general, tax loopholes are considered to be a forte of corporations and businesses but there are quite a few that individual taxpayers can take advantage of to save taxes. There are a few gaps in the tax code that are perfectly legal to leverage as a taxpayer. In this blog post, we will discuss some common loopholes in the IRS tax code that can help you save on taxes. Read on.
Capital Gains Tax
Capital gains tax is the money that you must pay the government on what you make by selling an asset at a higher price than what you paid for it. This is considered a loophole because the rate of capital gain tax is lower than the ordinary income tax rate. The income from capital gains is taxed at a rate of 15%, 7% lower than ordinary income tax, which is calculated at 22%. If most of your income is coming from investments, you are liable to pay lesser tax than you would pay on income from employment.
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Deduction on Home Mortgage Interest
Almost every taxpayer who pays a mortgage on their house and claims itemized deductions can claim home mortgage interest deduction when filing returns. If you have an expensive home and pay mortgage interest on a big percentage of its cost, you can claim a deduction that significantly reduces your taxable income.
Health Insurance Benefits Paid By Employer
According to the Tax Code, health insurance benefits paid by an employer are not taxable. You don’t have to claim them as your income. During job hunting, if you have a choice between a higher paycheck with no benefits and a smaller paycheck plus benefits, you need to think about what you can save as the benefits that come with a smaller paycheck are absolutely tax-free.
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Saving Plans for Kid’s Education
According to section 529 of the federal Tax Code, the money that you tuck away in an education fund for your kids is tax-free. There is no federal limit to how much you can contribute to your kids’ college fund but individual states have limits on the maximum amount. The good thing about this loophole is that it gives you and your spouse equal chances to save on your individual taxable income by contributing to your kids’ college fund individually.
Wrap Up
One thing to keep in mind is that tax laws change periodically. If you try to exploit a loophole that is no longer valid, it can attract IRS tax problems. It is important to consult a knowledgeable and experienced tax attorney before attempting to take advantage of any tax loophole. For help with IRS tax problems in Fort Worth and Dallas areas, The Law Offices of Nick Nemeth is the way to go. Our team of tax attorneys has extensive experience in handling tax problems and helping taxpayers resolve their issues with the IRS with favorable outcomes. To talk to one of our attorneys, call (972) 426-2553 or fill out our contact form, and we will take it from there.
