Recently I received a promotion and increase in pay. Effective 11/1 I will have an annual salary of 90K + 25% bonus contingent on some performance factors. I work in the hotel business.
I’ve never used a tax professional and I understand that might be forbidden but I want to take taxes serious as I increase my salary and grow my career. I want to take advantage of tax savings available; however, I understand there may not be any because my salary isn’t substantial.
What should I do in 2023 to ensure I’m positioned to benefit the most within the current laws? I live in Arizona.
Anything else I should know is super helpful.
TIA
Assuming this is W2 income, your scenario isn’t complex enough to require a professional. You can do your own taxes with commercial software. If you want to reduce your taxable income, contributing to your 401k, and HSA if available, is the easiest way.
A dirty secret:
Many “tax professionals” are someone just like you that got hired off the street just before tax season, given less than two full weeks of training, and then they are put to work filing tax returns for people who walk through the door at companies like H&R block and Jackson Hewitt.
On the other hand, there are real tax professionals out there who do it full time and have titles like “CPA”, “Tax Accountant”, “Tax Attorney” and the like. But at $100K with no complex situations (such as owning a business), the amount of money one would pay them is probably more than you’d save in taxes.
I’m sure others will give you some specific tips…. but for many people, the biggest tax savings over their lifetime come from fully funding their retirement, HSA, and other tax-advantaged accounts and letting them grow until retirement.
The other thing to do is to take advantage of certain tax credits as they are available. Without knowing more about your personal situation I can’t really be verbose about what might apply to you. For example, if you’re a homeowner, there are often tax credits that give you partial credit when you decide to upgrade your home to make it more efficient. However these almost always require you to spend more money than the credit is worth, so it’s only useful if you were already planning on doing whatever the credit is relevant to.
Do you own real estate? Lots of deductions with this.
Are you a 1099 employee? Lots of deductions with this.
Do you own a business? Lots of deductions with this.
Do you stock LOSSES or gains?
Married or single? Any dependents?
If the answer is NO, I am just an average w2 employee, your best tax move is either a 401K, IRA, or ROTH IRA. or all of them.
For a W2 employee you can mitigate your tax payment by claiming exemptions. Going from memory you should be in the 22% tax bracket. (But I could be darn wrong on that)
The Schedule A has been revamped and taking the standard deduction is the best way to go for most people. Standard deduction is something like $25000, another i need to bust out the tax forms thingee.
My wild hair guess, based on numbers out of my head, not knowing anything else about you, you will owe $1500 per month in taxes or $18000 in total.(it could be lower) From your first paycheck, you can see if your exemptions are putting you near that number. If you claim one exemption and your monthly taxes are $2000, add another exemption. I think you can claim up to 10.
You can basically do your own taxes just by creating a spreadsheet Which I know is daunting but in the long run, it will pay off.
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