After a disastrous 2023 tax year in which I ended up owing $15,000, I am happy to report that I’ve now reduced that tax bill down to $5000. At least that’s where I stand at the time of this post and I’ll wait till April to officially file my return.
What Worked To Reduce My Tax Bill
Municipal Bonds
The first thing I did was to swap taxable investments in my taxable accounts from taxable interest investments to tax-free ones such as municipal bonds. I haven’t updated the math but I now have over $50,000 in municipal bonds that yield tax free interest and some are earning the tax equivalent of 7.25% now. It was great seeing money on that line on 1099-INT that said “exempt interest” on them!
Rental Property Repairs
We actually had a small loss ($300) this year on rental properties. Normally it would generate a few thousand in income but we had repairs that ate into the revenue and the property taxes went up. We’ve adjusted the rent so we’ll see how 2025 pans out. The good news is we didn’t owe taxes on the income we generated but it has made me wonder if rental properties will be viable in the future with taxes, maintenance and other costs keep going up.
Stock Sales
I sold RSU stock last year as soon as it vested and I reached 12 months + 1 day to sell to make sure I got the capital gains tax rate vs ordinary income. I also avoided selling any stock that wasn’t owned at least 12 months to avoid ordinary income tax rates.
What Didn’t Work To Reduce My Tax Bill
Income Too High
Turbo tax had an endless series of popup windows about why we didn’t qualify for any tax breaks and it was usually because our income exceeded $150,000 which was the threshold for child credits, loan interest, etc.
401k Roth Contributions
I shifted my 401k contributions from tax deferred to Roth which meant that I could no longer defer that income. I did keep some money in the traditional 401k right up to the company match then maxed the Roth IRA.
Share The Wealth
How much do you owe Uncle Same this year? Let me know in the comments below!
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