6 Ways to Reduce Your Taxable Income in 2020 (Loopholes You Need To Start Using!)

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what's up everybody I'm rose and today

I'm gonna talk to you about some ways to

save money on taxes I'll explain six

investing tax loopholes that will help

you reduce your tax bill so you can keep

more of what you make legally


the bottom line is if you want to pay

less taxes you have to reduce your

income the best way to do this is to

quit your job not make any money and

just live off food stamps just kidding

but seriously if you want to pay less

taxes you have to lower the income that

the government views as taxable

this doesn't mean making less money it

just means you need to switch over to

certain types of income that aren't

taxable this is called tax exempt income

the more tax exempt income you have the

less taxes you'll pay you also want to

maximize all your tax deductions the

more tax deductions you take the less

taxes you'll pay did you know that

Warren Buffett pays less taxes than his


it might seem unfair but tax laws are

skewed way way way way in favor of

investors and business owners although

we can't all be like Warren Buffett

there's a lot of ways to reduce your tax

bill even if you don't own a business or

have a lot of money the easiest way to

reduce your taxes is by putting money

away into a 401 K in general you owe

taxes on everything you make as soon as

the money comes through the door but

with a 401 K the IRS lets you contribute

a chunk of your paycheck to that first

and then they'll charge you taxes on

whatever's left the unresolved and

invest with tax-free earnings here's an

example let's say your salary is $5,000

a month you decide to save five hundred

dollars of that every month into your

401 K which lowers your taxable income

to four thousand five hundred dollars

and if your tax rate is 40 percent

then instead of owing two thousand

dollars which is 40 percent of five

thousand you'll pay only $1,800 so

that's two hundred dollars that you

saved that money stays with you instead

of going to the government you'll be

able to save your money so much faster

in a 401k account especially if you're

lucky enough to have an employer that

offers match contribution matching where

they'll match all your contributions

dollar for dollar then you should

totally take advantage of that that's

basically free money that's also

tax-free I mean hell yeah I am all

over that one thing you need to know is


were meant to help you save for

retirement so you generally can't touch

this money until you turn 59 and a half

although there are some cool things you

can do like you can take a loan out from

it if you want to make a big purchase

like buy your first house you're

basically just borrowing money from your

own 401k so there are things like that

that you can do but generally this money

is meant for a retirement so you can't

touch it till you retire also you can

only open a 401k if you work for an

employer that offers one so if you don't

have a 401k through work or you're

self-employed like me then this next one

is for you the SEP IRA is the equivalent

of a 401k and it's for all you

freelancers self-employed peeps and

business owners lets you put away up to

25 percent of your net business income

into a tax-free investment account I've

talked to way too many freelancers and

independent contractors who don't know

about this tax loophole and it's not

even a tax loophole it's just something

available for everyone and this is a

huge mistake if you're self-employed

definitely look into step irony's it's

like why pay any more taxes than you

need to so if there's only one thing you

take away from this video it's this open

a step IRA this one's my favorite

HSAs are a lot like 401ks and SAP IRAs

in the sense that any contributions you

make to it immediately reduces your

taxable income but HSAs are a little bit

different because they're supposed to

help you pay for health related expenses

with tax-free money and the good thing

about HSA is is you don't have to wait

till you're retired to spend it you can

use them for all health related expenses

right now so I use my HSA to pay for my

contact lenses acupuncture visits and

you can even use it for massages if you

get a prescription from your doctor

HSAs are typically only allowed for

people who have health insurance plans

that have really low monthly premiums

but higher out-of-pocket expenses having

an HSA makes a lot of sense for you if

you're pretty healthy and you just want

a tax every way to cover your medical


if and when you need it now let's talk

about some ways to make tax-free income

municipal bonds or muni xin Wall Street

jargon our bonds issued by local

governments to fund things like

infrastructure water projects and

anything that the city county or state

needs to to run well the best way to

invest in muni z' is through municipal

bond funds which are funds that hold

hundreds and even thousands of bonds

from different municipalities and this

is good because it helps you diversify

and spread out your credit risk

short-term municipal bond funds can be a

relatively safe place to park your cash

while earning some tax-free interest as

of today March 2019 you can expect to

make a yield of around 1.6 5% which

doesn't sound like much but if you

factor in the tax benefit you get a tax

equivalent yield of about two and a half

percent of course this is not a

recommendation to buy because it has to

be appropriate for your situation and

municipal bonds do have their risk but

if you want to do more research on this

check out VMs XX or vwi TX which are

bond funds run by Vanguard 1031 exchange

if you own rental property or you want

to own rental property one day this one

is for you real estate tends to go up a

lot in value but if you were ever to

sell you would have to pay major taxes

on the games with capital gains tax at

20% we're talking a big chunk of change

when it comes to real estate but thanks

to 1031 exchanges you could get away

with never paying taxes on any of your

real estate for the rest of your life so

in a 1031 exchange you pay zero taxes on

the gains when you sell your investment

property as long as you roll it over

into a new property of equal or higher

value basically a tax break offered by

the government to help you grow your

real estate portfolio think about it

normally when you sell you have to pay

full capital gains on any profits you've

made and if you want to reinvest that

money into something else you'd have 20%

less buying power because you had to pay

your taxes but if you do a 1031 exchange

you can pocket all the gains without

having to pay any

is on it as long as you follow a few

simple rules one of them being that you

need to reinvest that money into a new

property people do this all the time

trading in a duplex for a triplex and

then trading that in for a multi-family

building and then trading that in later

on for an apartment building and just

getting bigger and bigger that way it's

a lot easier to grow your net worth when

you don't have to pay taxes there's

definitely a lot of advantages to

investing in real estate and the 1031

exchange is literally one of the best

things out there and what makes real

estate so great for building wealth this

is a good one too Roth IRAs are another

way to avoid paying taxes on your

investments anything you buy inside of a

Roth you'll never have to worry about

taxes again any stocks bonds or assets

you hold in your Roth IRA can grow

tax-free until you retire and when you

retire any income you get or withdrawals

you make from your Roth or tax-free as

well a key feature of Roth IRAs

is that your contributions don't reduce

your taxable income this year but you

get the tax benefits on the back end

when you retire so a great combination

is to have a 401k and a Roth IRA or for

a self-employed folks a SEP IRA and a

Roth IRA maxing out your contributions

to both accounts would mean you're

saving as much as possible for a

retirement and not paying any more in

taxes than you need to also just to

comment if you are starting out

investing in stocks bonds and other

paper assets make sure you have an IRA

either a Roth step or traditional or

you're doing it within a 401k basically

make sure you're doing it within a

tax-advantaged account before you do it

in a brokerage account which is fully

taxable because otherwise you're leaving

a lot of money on the table now I have a

question for you which is your favorite

investing tax loophole and why let me

know in the comments below because I'd

love to know that's it for today thanks

so much for watching I really appreciate

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life on your terms Cheers