Many people today have a few things they complain about on a regular basis. One of the things that is a common complaint is taxes. Many people firmly believe they are paying too much and others believe that someone else is not paying nearly enough. Unfortunately, we can all be paying too much.
As much as many people complain about taxes, everyone does not take the proper course of action to understand taxes. When one takes the time to understand taxes, it can lead to reducing tax tasks and lowering the tax burden. For early retirees, the tax code in the United States is rather friendly. We understand that many people do not have a desire to retire in the traditional way. There are many early retirees who wish to continue working on a part-time basis. Those who can live on a reduced income will be able to earn more money with increased tax efficiency.
When you can ensure your taxable income stays in the lower income tax bracket, you will have a low effective tax rate. A low effective tax rate will almost always ensure that your investment income will be taxed at zero percent. If you are not sure what it actually means to live on a lower income, we encourage you to consult with a tax professional so you can find out what it means to live on a lower income as it relates to taxes.
When you do not need to earn an income, you will be able to significantly reduce the amount of income taxes you are responsible for. Once you become more independent financially, you may be able to pay off your mortgage if you have not already done so. When you do not need to have a high income, you will spend less, and you will find yourself paying a reduced amount of taxes.
If you want to learn more about taxes and how to plan for retirement, please do not hesitate to contact us today.