W-2 earner looking to lower effective tax rate

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LeftCoastIV
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Joined: Wed May 01, 2019 7:19 pm

W-2 earner looking to lower effective tax rate

Post by LeftCoastIV » Sat May 11, 2019 7:43 pm

Hi -
My question for this post is what strategies I may not be considering to lower, or postpone, my taxable income each year.

Context:
  • 44 years old. Married, wife is a homemaker, but has family related income that I am not considering for this post
    My W-2 puts me in the 37% marginal tax bracket, leading to a significant amount of income tax owed each year.
    I max out my 401K every year ($18.5K), plus employer match of $9,250
    I contribute $1K into an HSA per year, plus employer contribution of $2.5K
    Taxable interest income was $3K
    Dividend income was $13K
    We do not have a mortgage, so no mortgage interest deductions.
    Property taxes of ~$15K per year (but see standard deduction cap below)
    I filed my taxes separately from my wife as our CPA's calcs showed that to be the most efficient overall plan
    Standard deduction of $12K
    Overall, my "effective tax rate" was 33%
My company offers a Deferred Compensation plan, but I have declined to participate as it is an unsecured liability. If the company ever ran into real trouble (e.g. bankruptcy), I would be at/near the bottom of the food chain to collect.

I have not considered a mega-back door Roth to help lower future taxes, but am thinking that is something I should probably pursue.

Overall, the 33% effective rate feels very high, and makes me think I am not being sufficiently thoughtful in how to lower this effective rate.

All thoughts appreciated.

Thanks

Archimedes
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Re: W-2 earner looking to lower effective tax rate

Post by Archimedes » Sat May 11, 2019 7:56 pm

It is really very simple, when you make a lot of income you have to pay a lot of taxes. I had similar feelings like you in the past, but I have come to terms with it now. I just have to pay a lot of taxes and that is the price of making a high income and living in the good old US of A.

Greenman72
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Re: W-2 earner looking to lower effective tax rate

Post by Greenman72 » Sat May 11, 2019 7:57 pm

Easiest way to pay less in tax—make less money.

Spirit Rider
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Re: W-2 earner looking to lower effective tax rate

Post by Spirit Rider » Sat May 11, 2019 8:02 pm

LeftCoastIV wrote:
Sat May 11, 2019 7:43 pm
I contribute $1K into an HSA per year, plus employer contribution of $2.5K
Why are you not maximizing your max HSA contribution limit - your employer contribution. That will reduce your taxable income. That should be the second highest priority after making 401k contributions to receive the maximum employer match. You should also be paying all qualified medical expenses out of pocket.
I have not considered a mega-back door Roth to help lower future taxes, but am thinking that is something I should probably pursue.
While they will not directly reduce your taxes, you should be doing regular backdoor Roths for you and your spouse and Mega Backdoor Roth if your 401k plan supports employee after-tax contributions and in-plan Roth rollovers and/or in-service rollovers to a Roth IRA. By investing in Roth accounts in instead of taxable, you eliminate future taxes on your investments.

If you have to much income, you can always share the wealth by making charitable donations. That will reduce your taxes.

fyre4ce
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Re: W-2 earner looking to lower effective tax rate

Post by fyre4ce » Sat May 11, 2019 8:10 pm

At first glance, it seems strange that your accountant would recommend you file separately. Typically, couples with one spouse as a high earner and the other as a low earner benefit from filing jointly. Maybe there are factors at play I’m not aware of, but I would double-check that this is the right move.

For w-2 employees, unfortunately options to reduce taxable income are limited. A lot of the options available to the self-employed (business deductions, $56k 401k limit, etc.) aren’t available to you. Sounds like you’re mostly doing the right things. Buying a more expensive house just to write off more mortgage interest usually isn’t a smart move.

You should, however, make sure you and your spouse are doing Backdoor Roth IRAs. It doesn’t save you income tax now but it’s another $12k/year that will never be taxed again. Make sure your taxable investments are tax-efficient- muni bonds, passive stock funds, maybe look at tax-managed funds. A taxable yield of ~2% or less is a good goal. I would also max out the HSA at $7k/year. If you don’t spend it on medical expenses, it works like an ira, and can be withdrawn penalty free after age 65.

I would think carefully about the deferred compensation plan- it does exactly what you want. The fact that the money is exposed to your employers creditors is a negative, but that’s true of all pensions. Is there a reason to think your employer is unusually vulnerable? You could do a probabilistic calculation- figure out how much the pension plan will save you, and how much you stand to lose if the employer defaults, and put a probability on the default. For example, if you stand to save $100k if the pension remains liquid, and lose $1M if they default, there would have to be a >10% chance of default for it to be a bad move to contribute. 10% chance of an employer defaulting on their pension is really high, although see what the numbers work out for you.

Edit: It's important for you (and readers) to understand the difference between the Backdoor Roth IRA and the Mega Backdoor Roth. The Backdoor Roth IRA is through an IRA, so you control it. There's basically no reason not to do it (assuming you can afford to save the $12k per year, and it sounds like you can). The only obstacle that hangs up some people is having a large Traditional IRA balance. But if you do, just roll it into your 401k at work, and problem solved.

The Mega Backdoor Roth has some similarities, but it's with a 401k instead of an IRA. It's rare because it requires your 401k provider to offer the option to make after-tax contributions, and also in-service Roth conversions. You can investigate with your 401k provider, but only a small percentage of 401k providers allow it, so I wouldn't get your hopes up. But if it does work for you, you can potentially contribute up to $56k minus the ~$29k you and your employer put in, so about $27k.

JBTX
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Re: W-2 earner looking to lower effective tax rate

Post by JBTX » Sat May 11, 2019 9:20 pm

There just isn't enough info given to sort this out. It is really hard to figure how a single earning married couple files married filing separately.

If you are married filing jointly, at 600k of taxable income your effective rate is 27%. At $1 million of taxable income it is 31%.

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changingtimes
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Re: W-2 earner looking to lower effective tax rate

Post by changingtimes » Sat May 11, 2019 10:48 pm

As someone said above, about the only other option is to increase your charitable giving. You could open a donor advised fund and contribute to it as long as you are working, even if you aren't making big donations yet. Once you're taking RMDs, then you can use QCDs to lower income. Otherwise, yeah, you're just enduring the harsh reality of making lots of money. 😁

MikeG62
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Re: W-2 earner looking to lower effective tax rate

Post by MikeG62 » Sun May 12, 2019 6:37 am

JBTX wrote:
Sat May 11, 2019 9:20 pm
There just isn't enough info given to sort this out. It is really hard to figure how a single earning married couple files married filing separately.

If you are married filing jointly, at 600k of taxable income your effective rate is 27%. At $1 million of taxable income it is 31%.
Agree with this - sounds very odd that they'd come out ahead as married filing separately. OP should run the numbers to make sure he is somehow not getting bad advice.

OP, although deferred compensation plans are unsecured liabilities, if you employer is large and stable and highly unlikely to go anywhere this might be a reasonable option to consider. I was in one and although it did not work out for me (employer was acquired triggering payment of all deferred amounts in a lump sum) I thought the risk of losing any of the deferred amounts was very, very low. Also, was able to get some company match on the deferred amounts (this was over and above the match that was given on their 401k plan). This is likely plan specific.
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Kayakr
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Re: W-2 earner looking to lower effective tax rate

Post by Kayakr » Sun May 12, 2019 6:59 am

You're right, it's crazy high and why I personally don't seek bigger positions managing 3-5x the number of people for a 20% gain. I'm not that desperate and my ego needs don't compensate either. Quora has a few threads on this, some with replies by apparently well qualified people. https://www.quora.com/What-are-the-bigg ... -available

One of the better answers seemed to be investment property which allows you to take a depreciation deduction of 1/29 residential or 1/40 commercial on the value of the building. However, this is certainly a big step up in risk, time and commitment. Maybe you can find a property manager to handle most of it for you.

danaht
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Re: W-2 earner looking to lower effective tax rate

Post by danaht » Sun May 12, 2019 7:21 am

It sounds like you are already doing everything you can (max out 401k, contribute fully to HSA). There is really nothing else you can do as a W2 employee. You could see about converting as a 1099 contractor - but then you would lose a lot of benefits. You would lose your employer's very generous HSA employer contribution, high 401k match, and potentially good vacation/sick leave policy. In addition - you would have to pay twice the payroll taxes that you are paying now. In your case - your probably better off just paying the income taxes as a w2 employee and be thankful of such a high income.

nolesrule
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Re: W-2 earner looking to lower effective tax rate

Post by nolesrule » Sun May 12, 2019 10:08 am

If you have a family HDHP plan, you should be contributing the max family amount to the HSA, which is $7k in 2019 (inclusive of employer contributions).

fyre4ce
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Re: W-2 earner looking to lower effective tax rate

Post by fyre4ce » Sun May 12, 2019 1:09 pm

Kayakr wrote:
Sun May 12, 2019 6:59 am
One of the better answers seemed to be investment property which allows you to take a depreciation deduction of 1/29 residential or 1/40 commercial on the value of the building. However, this is certainly a big step up in risk, time and commitment. Maybe you can find a property manager to handle most of it for you.
Real estate can be a good investment, but keep in mind that the Passive Activity Loss Limitation applies above a MAGI of $150k (so definitely applies to the OP) so he won't be able to deduct year-to-year losses form the depreciation deduction.

WolfgangPauli
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Re: W-2 earner looking to lower effective tax rate

Post by WolfgangPauli » Sun May 12, 2019 9:26 pm

I agree with you on the deferred comp but do you think that is even possible? If you think bankruptcy is remotely possible you may need to evaluate the career with that company.

Yes, it is a risk but think of it this way, you are getting a 33% return and that money grows pre-tax. Huge return and may or may not be a big risk. You are in the best place to know as you are "inside" (is it publicly held) but I put 10% in the deferred comp, I select to get it in one lump sum upon retirement and I think it is well worth the risk.
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HomeStretch
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Re: W-2 earner looking to lower effective tax rate

Post by HomeStretch » Sun May 12, 2019 9:35 pm

+1 to max HSA contributions.

Adjust the holdings in your taxable accounts to be more tax efficient, if possible, to minimize your taxable interest and dividend income.

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unclescrooge
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Re: W-2 earner looking to lower effective tax rate

Post by unclescrooge » Sun May 12, 2019 9:42 pm

Kayakr wrote:
Sun May 12, 2019 6:59 am
You're right, it's crazy high and why I personally don't seek bigger positions managing 3-5x the number of people for a 20% gain. I'm not that desperate and my ego needs don't compensate either. Quora has a few threads on this, some with replies by apparently well qualified people. https://www.quora.com/What-are-the-bigg ... -available

One of the better answers seemed to be investment property which allows you to take a depreciation deduction of 1/29 residential or 1/40 commercial on the value of the building. However, this is certainly a big step up in risk, time and commitment. Maybe you can find a property manager to handle most of it for you.
Real estate is over rated.

If you make $150k you can't claim any of the deductions.

Also, the OP doesn't sound like he had time to hunt for good deals in real estate.

Also, the numbers for residential are 1/27.5, not 1/29.

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unclescrooge
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Re: W-2 earner looking to lower effective tax rate

Post by unclescrooge » Sun May 12, 2019 9:44 pm

LeftCoastIV wrote:
Sat May 11, 2019 7:43 pm
Hi -
My question for this post is what strategies I may not be considering to lower, or postpone, my taxable income each year.

Context:
  • 44 years old. Married, wife is a homemaker, but has family related income that I am not considering for this post
    My W-2 puts me in the 37% marginal tax bracket, leading to a significant amount of income tax owed each year.
    I max out my 401K every year ($18.5K), plus employer match of $9,250
    I contribute $1K into an HSA per year, plus employer contribution of $2.5K
    Taxable interest income was $3K
    Dividend income was $13K
    We do not have a mortgage, so no mortgage interest deductions.
    Property taxes of ~$15K per year (but see standard deduction cap below)
    I filed my taxes separately from my wife as our CPA's calcs showed that to be the most efficient overall plan
    Standard deduction of $12K
    Overall, my "effective tax rate" was 33%
My company offers a Deferred Compensation plan, but I have declined to participate as it is an unsecured liability. If the company ever ran into real trouble (e.g. bankruptcy), I would be at/near the bottom of the food chain to collect.

I have not considered a mega-back door Roth to help lower future taxes, but am thinking that is something I should probably pursue.

Overall, the 33% effective rate feels very high, and makes me think I am not being sufficiently thoughtful in how to lower this effective rate.

All thoughts appreciated.

Thanks
Under what circumstances is MFS better than MFJ?

Are you sure your CPA knows what he's doing?

Starfish
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Re: W-2 earner looking to lower effective tax rate

Post by Starfish » Mon May 13, 2019 1:52 am

Archimedes wrote:
Sat May 11, 2019 7:56 pm
It is really very simple, when you make a lot of income you have to pay a lot of taxes. I had similar feelings like you in the past, but I have come to terms with it now. I just have to pay a lot of taxes and that is the price of making a high income and living in the good old US of A.
It's actually the other way around. US has a pretty low tax rate for a developed country. One of the lowest.
The problem is the value we get for our taxes, which also very low.

kacang
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Re: W-2 earner looking to lower effective tax rate

Post by kacang » Mon May 13, 2019 5:44 am

As a W2 wage earner, there isn't very much other than what you are already doing.

We max out backdoor Roth & megaRoth within our 401k. Since these would be part of our post-tax savings anyways, might as well put it in a (future) tax-free space. We also use muni's in taxable and total bond in 401k for tax efficiency.

Chip
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Re: W-2 earner looking to lower effective tax rate

Post by Chip » Mon May 13, 2019 7:47 am

fyre4ce wrote:
Sat May 11, 2019 8:10 pm
At first glance, it seems strange that your accountant would recommend you file separately. Typically, couples with one spouse as a high earner and the other as a low earner benefit from filing jointly. Maybe there are factors at play I’m not aware of, but I would double-check that this is the right move.
I agree, but perhaps it's the spouse's "family related income" that the OP mentioned that's creating this situation.

Kayakr
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Re: W-2 earner looking to lower effective tax rate

Post by Kayakr » Mon May 13, 2019 11:13 am

US has a pretty low tax rate for a developed country. One of the lowest.
US has average and very progressive income taxes compared to OECD. OECD data includes more costs as taxes (e.g. healthcare, 401-k) where workers in the US pay for it privately. US also has different collection of SALT taxes.
https://taxfoundation.org/comparison-ta ... oecd-2016/

US did have highest corporate tax rates until recent tax policy changes
https://www.mercatus.org/publication/up ... rates-oecd

bike2fire
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Re: W-2 earner looking to lower effective tax rate

Post by bike2fire » Mon May 13, 2019 1:03 pm

LeftCoastIV wrote:
Sat May 11, 2019 7:43 pm
  • I contribute $1K into an HSA per year, plus employer contribution of $2.5K
(Someone please step in if there are any errors below)

The reason others here have suggested maxing out HSA contributions is because the contribution limit for a family is $7000 while its $3500 for individuals. So you you’re only halfway to your maximum limit. If you choose to max out the HSA then you should be able to “save” on paying FICA taxes by asking your employer to make your contributions “pre-tax” instead of using your take home pay to do it.

lakpr
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Re: W-2 earner looking to lower effective tax rate

Post by lakpr » Mon May 13, 2019 8:31 pm

bike2fire wrote:
Mon May 13, 2019 1:03 pm
If you choose to max out the HSA then you should be able to “save” on paying FICA taxes by asking your employer to make your contributions “pre-tax” instead of using your take home pay to do it.
Not fully true, with the OP being in 37% bracket. That bracket suggests the OP is earning well above the $132,900 limit on which Social Security taxes are levied. So regardless of his HSA contribution, the OP is paying full SS tax.

By maximizing the HSA contribution, the OP at most will escape 1.45% of Medicare taxes which are levied on unlimited amounts of wages. With an additional $3500 maximum that the OP can contribute, he would be able to save $50 per year. Buys him a nice lunch or two perhaps, but nothing more than that.

nolesrule
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Re: W-2 earner looking to lower effective tax rate

Post by nolesrule » Tue May 14, 2019 6:44 am

lakpr wrote:
Mon May 13, 2019 8:31 pm
bike2fire wrote:
Mon May 13, 2019 1:03 pm
If you choose to max out the HSA then you should be able to “save” on paying FICA taxes by asking your employer to make your contributions “pre-tax” instead of using your take home pay to do it.
Not fully true, with the OP being in 37% bracket. That bracket suggests the OP is earning well above the $132,900 limit on which Social Security taxes are levied. So regardless of his HSA contribution, the OP is paying full SS tax.

By maximizing the HSA contribution, the OP at most will escape 1.45% of Medicare taxes which are levied on unlimited amounts of wages. With an additional $3500 maximum that the OP can contribute, he would be able to save $50 per year. Buys him a nice lunch or two perhaps, but nothing more than that.
The OP would also escape the 0.9% additional medicare tax on the HSA contribution. Not much, but it's something. So closer to $82 saved in Medicare taxes.

wrongfunds
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Re: W-2 earner looking to lower effective tax rate

Post by wrongfunds » Tue May 14, 2019 7:39 am

Overall, my "effective tax rate" was 33%
Is the implication that OP is paying $100K of federal income tax on his $300K (salary-401k contribution)? That is hard to fathom. On the other hand if he is saying, he is paying $1M of federal tax on his $3M income, I would buy that.

fyre4ce
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Re: W-2 earner looking to lower effective tax rate

Post by fyre4ce » Tue May 14, 2019 5:13 pm

lakpr wrote:
Mon May 13, 2019 8:31 pm
bike2fire wrote:
Mon May 13, 2019 1:03 pm
If you choose to max out the HSA then you should be able to “save” on paying FICA taxes by asking your employer to make your contributions “pre-tax” instead of using your take home pay to do it.
Not fully true, with the OP being in 37% bracket. That bracket suggests the OP is earning well above the $132,900 limit on which Social Security taxes are levied. So regardless of his HSA contribution, the OP is paying full SS tax.

By maximizing the HSA contribution, the OP at most will escape 1.45% of Medicare taxes which are levied on unlimited amounts of wages. With an additional $3500 maximum that the OP can contribute, he would be able to save $50 per year. Buys him a nice lunch or two perhaps, but nothing more than that.
...and he also saves on federal income tax on the $7000...

Katietsu
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Re: W-2 earner looking to lower effective tax rate

Post by Katietsu » Tue May 14, 2019 6:50 pm

Does the 33% include FICA and state taxes?

Check for state specific credits. Some of these can be unusual and unexpected.

Topic Author
LeftCoastIV
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Re: W-2 earner looking to lower effective tax rate

Post by LeftCoastIV » Thu May 16, 2019 2:39 pm

OP here...

Thank you for the great suggestions and commentary.

For HSA, I checked with my employer and I can contribute up to $7K per year for my situation. Since my employer contributes $2.5K per year, I can contribute $4.5K per year. I'm only contributing $1K per year right now, so I'm looking at increasing this to max out by plan here. My employer also lets me invest my HSA money into mutual funds. Seems like a bit of a no-brainer to avoid 37% incremental taxes on that income and instead put it into an account that I can invest.

I'm still thinking about the Deferred Compensation option based on the viewpoints on this thread. There are Vanguard options available within the DCP as well. As I mentioned, the unsecured liability issue makes me nervous, but very few companies have as much cash/asset on their balance sheet as my employer, so the risk is remote. What have others done here? 10% deferred? 25% deferred, and how did you handle distribution schedule? This may be the topic of a new thread entirely.

Thanks

Topic Author
LeftCoastIV
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Re: W-2 earner looking to lower effective tax rate

Post by LeftCoastIV » Sat May 18, 2019 6:38 pm

Katietsu wrote:
Tue May 14, 2019 6:50 pm
Does the 33% include FICA and state taxes?

Check for state specific credits. Some of these can be unusual and unexpected.
I live in a state with no income tax

Elena
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Re: W-2 earner looking to lower effective tax rate

Post by Elena » Sat May 18, 2019 9:27 pm

I think your only choice would be to max out the 403(b) and/or 457(b), for $19,000 each/yr. I do them both, as well as the 401(a) and HSA, so my taxable amount is quite low (my salary is US middle class average). My IRA contributions are Roth, though.

WolfgangPauli
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Re: W-2 earner looking to lower effective tax rate

Post by WolfgangPauli » Tue Jun 04, 2019 10:21 pm

LeftCoastIV wrote:
Thu May 16, 2019 2:39 pm
OP here...

Thank you for the great suggestions and commentary.

For HSA, I checked with my employer and I can contribute up to $7K per year for my situation. Since my employer contributes $2.5K per year, I can contribute $4.5K per year. I'm only contributing $1K per year right now, so I'm looking at increasing this to max out by plan here. My employer also lets me invest my HSA money into mutual funds. Seems like a bit of a no-brainer to avoid 37% incremental taxes on that income and instead put it into an account that I can invest.

I'm still thinking about the Deferred Compensation option based on the viewpoints on this thread. There are Vanguard options available within the DCP as well. As I mentioned, the unsecured liability issue makes me nervous, but very few companies have as much cash/asset on their balance sheet as my employer, so the risk is remote. What have others done here? 10% deferred? 25% deferred, and how did you handle distribution schedule? This may be the topic of a new thread entirely.

Thanks
I do 10% on the deferred and I set it so I take it as a lump sum when I leave. That minimizes the risk.. if you take payments over years you add to the risk. This is a one time selection and it is non reversible so think closely when you select how you will take the payout.
Twitter: @JAXbogleheads | EM: JAXbogleheads@gmail.com

Starfish
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Re: W-2 earner looking to lower effective tax rate

Post by Starfish » Wed Jun 05, 2019 1:24 am

Kayakr wrote:
Mon May 13, 2019 11:13 am
US has a pretty low tax rate for a developed country. One of the lowest.
US has average and very progressive income taxes compared to OECD. OECD data includes more costs as taxes (e.g. healthcare, 401-k) where workers in the US pay for it privately. US also has different collection of SALT taxes.
https://taxfoundation.org/comparison-ta ... oecd-2016/

US did have highest corporate tax rates until recent tax policy changes
https://www.mercatus.org/publication/up ... rates-oecd
I always doubt this articles because I lived in other countries in OECD, I know how much the employer is taxed and how much you can subtract from taxes. Same with corporate tax, it seems high but nobody pays it.
Retirement in other countries has also 2 components, the private and the social one. But usually the tax advantage on the private one is very modest.
The main difference is the education and healthcare. I would happily pay a little more and have them if not free at least affordable.

mass_biker
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Re: W-2 earner looking to lower effective tax rate

Post by mass_biker » Wed Jun 05, 2019 5:31 am

Same situation - to consider

1) max out 401k
2) TIRA/back door ROTH
3) HSA/HDHP
4) Deferred comp if available
5) 529s (for our state)
6) After tax $ in muni bond funds for taxable < don't discount this...

I echo other posters' views on deferred comp. Yes, it is an unsecured liability, but are you in a position to understand/have insight on the company's long term viability? If not, and if the company is public, do you have access to rating agency reports etc. for you to personally "underwrite" the quality of this company's counterparty risk?

Full disclosure - I've always utilized deferred comp and it has been a godsend to manage tax liability in big years when option grants come through.

Our plan is a pretty good one (and as an officer of the company, I also sit on the governance body that selects fund options - unsurprisingly, now there a lot of index/low fee options!). It's good that you have Vanguard choices in yours.

To your question on how much deferred comp. space to use. Our plan allows for up to 50% of base and 100% of bonus. To utilize this space, you need to have a good bead on your cash flow profile, as once you make that election, you are locked in (for that plan year). Our plan has an interesting feature in that allows for "re-deferral" on a separation of service. Which means that once you part ways, you elect to receive your first distribution five years from separating from employment, and the distributions are then paid out over 5 years. So depending on your planning and how much you put in, this could serve as a nice bridge during a period when you are no longer employed/before you start taking RMDs for example.

sophie1
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Re: W-2 earner looking to lower effective tax rate

Post by sophie1 » Wed Jun 05, 2019 7:11 am

Completely agree that the top two priorities are maxing out the HSA (that's like free money) and looking more carefully at filing jointly. Also, you probably want to consider rolling over your company HSA funds (keeping a few dollars in there to prevent closing it) to Fidelity or similar investment-friendly HSA, and invest it for the long term. Don't use the funds to pay medical expenses now, instead treat it like a Roth account.

Are you mortgage free because you own your home, or are you renting? If the latter, strongly consider buying. You may not get to deduct much of the mortgage interest, but if it gets you up to the $24K standard deduction limit you'll then be able to deduct charitable contributions. Once you can do that, donating appreciated stock shares is better than donating cash, since you also get to avoid capital gains tax. Also, take advantage of tax loss harvesting when/if you can.

After that, all you can really do amounts to deferring/minimizing taxes on savings. Good instruments for that are 529 accounts, US savings bonds, backdoor Roth conversions. An investment property would effectively do the same thing, since you'll be able to deduct depreciation & expenses against the rental income. Another bonus of the investment property is that if you do end up with net income, it will be business rather than interest/dividend. You'll then have more tax-reduction strategies available to you, to further reduce any taxes paid on it.

You might also check into the possibility of your employer paying you a base W2 salary and any extra on a 1099. I've heard of this kind of setup before, and I imagine that it's something more employers are now considering because of the tax advantages.

wilked
Posts: 1481
Joined: Thu Mar 24, 2011 1:50 pm

Re: W-2 earner looking to lower effective tax rate

Post by wilked » Wed Jun 05, 2019 7:21 am

Agree with the others, I would give this CPA a very hard look

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