Speaker 1: Episode on how to legally pay less in taxes. Welcome
Speaker 1: to the Frugal Friends podcast, where you'll learn to save money,
Speaker 1: embrace simplicity rights, and liberate your life. Here your host
Speaker 1: Jen and Jill. Mm hmm. Welcome to the Frugal Friends podcast.
Speaker 1: My name is Jen, my name is Jill, and today
Speaker 1: we are talking about taxes, specifically for regular people who
Speaker 1: do not own businesses where they can duct their entire lives.
Speaker 1: So that's all of this episode, regular people. Yeah, and
Speaker 1: then it's definitely we'll talk about side hustles and how
Speaker 1: you can kind of optimize paying less in taxes through that.
Speaker 1: But we are including as much as possible that is
Speaker 1: related doable to the average W two employee and as
Speaker 1: much as we are qualified to actually talk about. And
Speaker 1: so we're Yeah, this has been an episode that I
Speaker 1: have wanted to do for a while because it's something
Speaker 1: I have always been interested in but never felt qualified
Speaker 1: to talk about. And I started writing for a company
Speaker 1: last year that I said the only things I can't
Speaker 1: write about our taxes and insurance, and that was immediately
Speaker 1: the only two things they had me writing about. So
Speaker 1: I think they misunderstood me, and now I feel more qualified.
Speaker 1: That's a good journey to find ourselves today. But first,
Speaker 1: before we get into all of the wisdom that I
Speaker 1: may or may not have on taxes, our sponsors, today's
Speaker 1: episode is brought to you by things that we are
Speaker 1: really experts together a single expert on is saving money.
Speaker 1: So today's episode is brought to you by the Modern
Speaker 1: Frugal Living e book. If you are on our email list,
Speaker 1: you have in your inbox this very second, a free
Speaker 1: e book with over two hundred ways to save money.
Speaker 1: And this book includes checklists and resources to help you
Speaker 1: take action on the highest impact strategies. So if you
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Speaker 1: head to Frugal Friends podcast dot com Slash e book
Speaker 1: to get your promo code and everyone will also get
Speaker 1: two weeks of accountability emails that will help encourage and
Speaker 1: remind you to take action on this stuff. So again,
Speaker 1: head to Frugal Friends podcast dot com, Slash e book
Speaker 1: and start getting those quick wins that will snowball your
Speaker 1: momentum to financial freedom. So exciting free stuff, so much
Speaker 1: free stuff. We love giving away free stuff, Yeah, we do,
Speaker 1: especially when you can't save money on taxes. Legally, you
Speaker 1: need the free stuff. You've got to pay the taxes,
Speaker 1: So let us give you the book for free. Also
Speaker 1: brought to you by the Path less Traveled. Sure it
Speaker 1: may not be well worn and might even be a
Speaker 1: little bit overgrown, but it's quieter and usually more interesting.
Speaker 1: The path less traveled, if it means doing the right thing,
Speaker 1: take that path. Is the pathless traveled covered in dirt
Speaker 1: because people are still talking about the dirt, trail, the dirt.
Speaker 1: You where you didn't say path, but you just said
Speaker 1: the dirt, the dirt, and we didn't correct it. No
Speaker 1: post or anything. Don't do that. Left it because it's funny. Yeah,
Speaker 1: and so congruent with that. I will be the entertainment
Speaker 1: on this episode and Gen will be the education. But
Speaker 1: none of us are tax prof nestionals. Absolutely. That is
Speaker 1: a caveat that we should make and any personal finance
Speaker 1: expert should make unless they are a certified public accountant,
Speaker 1: is that we're not tax professionals. We do not give
Speaker 1: tax advice. This episode is for educational purposes only, and
Speaker 1: we are going to go through vetted articles that are
Speaker 1: on the internet written by other personal finance experts. But
Speaker 1: if you think something applies to you, double check it
Speaker 1: with your tax software or your c p A. That's
Speaker 1: how you're really going to know if it works for you.
Speaker 1: But everything here is going to be super generalized. And
Speaker 1: with that, we'll start with our first generalized article from
Speaker 1: a tiny little site US News and World Report when
Speaker 1: we're talking about federal taxes. I decided not to go
Speaker 1: with the blogs and we're going just straight to the
Speaker 1: really big publications on this one. Smart move, Yeah, you know,
Speaker 1: and it's fifteen legal secret to reducing your taxes. Jill,
Speaker 1: with your penchant for tax knowledge, how did you feel
Speaker 1: about this one? I liked it, you know, as a
Speaker 1: as a person who pays my taxes. I know I
Speaker 1: know more than I might let on. But there were
Speaker 1: some interesting things that stood out to me in this
Speaker 1: and I think some of it will get into it,
Speaker 1: but has to do with whether or not you take
Speaker 1: the standard deduction or you itemize deduction. Some of the
Speaker 1: things don't apply to me specifically, but overall, I thought
Speaker 1: really helpful information and things to consider with taxes and
Speaker 1: what's going to give us the best opportunity for not
Speaker 1: spending more on taxes than what we need to but
Speaker 1: also not avoiding the taxes that we do need to pay,
Speaker 1: you know, keeping it legal. Yeah, I agree. I liked
Speaker 1: this one as well because it's it's easy to find
Speaker 1: the tax articles where they're only looking at people that
Speaker 1: itemize their deduction, which is not a lot of us,
Speaker 1: or small business owners, which maybe a good amount of people,
Speaker 1: especially if you have a side hustle, but that's not
Speaker 1: necessarily everyone. And so we have to be realistic because
Speaker 1: taxes really are the biggest fee that we pay in life.
Speaker 1: So sometimes you'll you'll hear US or other experts talking
Speaker 1: about low fee index funds with investing or paying off
Speaker 1: your debts so that you're not paying the interest on
Speaker 1: your debt. So taxes. The tax brackets range from like
Speaker 1: ten to thirty seven as of the time of this recording,
Speaker 1: but the kind of around the average you'll pay is
Speaker 1: around fifteen because you don't if you're in the thirty
Speaker 1: seven percent tax bracket, you're not paying that on every
Speaker 1: single dollar you earn. Uh, it's a it's cremental, it's
Speaker 1: a ladder. So the first you know, ten grand or
Speaker 1: something is taxed at the lowest and then you go,
Speaker 1: you know this to this is taxed the next highest
Speaker 1: and so on and so on. So you're not paying
Speaker 1: the percentage of your tax bracket. You're not paying that
Speaker 1: on every single dollar, and so a I think that
Speaker 1: should be encouraging, like, yeah, increase your income and don't
Speaker 1: worry about your tax bracket, stop thinking about your tax bracket,
Speaker 1: and work to increase your income. But it's also eye
Speaker 1: opening because if the average is around fift then that's
Speaker 1: I mean, that's more than probably your student loan interest.
Speaker 1: It's definitely more than your mortgage. So it's it's things
Speaker 1: that we have to we have to kind of bear
Speaker 1: in mind the percent of our income that we're paying
Speaker 1: to the government, which is great because we get a
Speaker 1: lot of great things for that, but we want to
Speaker 1: pay as little is legally possible, because that is our
Speaker 1: duty as Americans that have voted on this whatever these
Speaker 1: these people in Washington are doing and making all this
Speaker 1: tax law and stuff. You know so well, and that
Speaker 1: is another good poin. We've We've got listeners in a
Speaker 1: lot of different countries, so yeah, this is specifically talking
Speaker 1: about the United States. Yeah, but so so this yeah,
Speaker 1: definitely going to be relevant for the United States. But
Speaker 1: if you have kind of that idea is as a
Speaker 1: you know, as somebody who's not a billionaire, how can
Speaker 1: I pay as little tax as possible? I think that's
Speaker 1: a great mindset to have. So let's dive into our
Speaker 1: first strategy, and that is to contribute to a retirement account.
Speaker 1: So this is definitely not something that's going to up
Speaker 1: your tax refund. That's not what we're talking about. The
Speaker 1: title of this episode is not how to get a
Speaker 1: fatter tax refund, it's how to legally pay less in taxes,
Speaker 1: and so that may not be upfront, but it may
Speaker 1: be over time because we want to look at the
Speaker 1: bigger picture, and so that's kind of where a retirement
Speaker 1: account comes in. So we're looking specifically at traditional four
Speaker 1: oh one KSE and traditional i ras, and most people
Speaker 1: are going to use a traditional four oh one k
Speaker 1: to lower their taxable income. So, Jill, what did you
Speaker 1: think about this one? How much of this did you
Speaker 1: know related to a retirement account? I mean, I think
Speaker 1: I'm still learning so much about investing and how that
Speaker 1: impacts what we have to pay in taxes versus what
Speaker 1: we have to pay in the future. So I like
Speaker 1: I like these like digestible articles that help me understand that. Yeah,
Speaker 1: so usually it all and this all depends on what
Speaker 1: income you're making. So again talk to a c P,
Speaker 1: A test numbers and a calculator do that for you.
Speaker 1: But if you're trying to figure out, should I be
Speaker 1: putting more in my traditional four A one K to
Speaker 1: lower my taxes now, or should I be putting more
Speaker 1: in a roth either you know roth ira A or
Speaker 1: wrath four O one K that limits my taxes later. Typically,
Speaker 1: if you're just starting out in your career and you
Speaker 1: anticipate higher income growth in the future, then we say
Speaker 1: prioritize RATH because you're paying you're at a lower tax bracket,
Speaker 1: which means lower average tax cost. But if you are
Speaker 1: kind of at the height of your income or very
Speaker 1: happy with where you're at, if maybe you are in
Speaker 1: is you live in a city where you aren't triple
Speaker 1: tax so federal tax, state tax, and city tax, this
Speaker 1: is going to be of great importance to you if
Speaker 1: you are are being heavily taxed in in a year,
Speaker 1: and you may want to prioritize traditional four oh one
Speaker 1: K or traditional IRA at that point. So this is
Speaker 1: very situational. But when I was contributing to a four
Speaker 1: oh one K, I was kind of doing half and half,
Speaker 1: so I just took up the whole. I was maxing
Speaker 1: everything out, and so I kind of took nineteen five
Speaker 1: plus six thousand and divided it by two and then
Speaker 1: just put half in the traditional four O one K
Speaker 1: six thousand in the rath I RA and then the
Speaker 1: rest in the rath version of the four one K.
Speaker 1: Not everyone can do that. I'm not saying that's investment advice.
Speaker 1: I'm saying that's kind of what I did. But I
Speaker 1: only pay federal tax. I do not have a state
Speaker 1: tax or a city tax, because also you don't know
Speaker 1: what taxes are going to be like when you retire.
Speaker 1: So I mean, it's just good advice to just never
Speaker 1: put all your eggs in one basket in general. Yes,
Speaker 1: similar to what you're saying Jen about investing in a
Speaker 1: retirement account. The article also lists opening a health savings account,
Speaker 1: and so this would be for those of you who
Speaker 1: have an eligible high deductible medical plan. You can contribute
Speaker 1: to a health savings account, and those contributions to those
Speaker 1: accounts offer immediate tax deduction. UM it can grow tax
Speaker 1: deferred and can be withdrawn tax free for qualified medical expenses.
Speaker 1: So health savings account is specifically for your medical expenses,
Speaker 1: and then any balance left at the end of the
Speaker 1: year can be rolled over indefinitely. So this is just
Speaker 1: a really great place to put your money on something
Speaker 1: that you most likely will have to spend it on
Speaker 1: at some point and experience tax deductions as a result. Yeah,
Speaker 1: and the h s A they say you'll hear that
Speaker 1: an hs A is triple tax advantaged, so you don't
Speaker 1: pay tax on the money that's going in, you don't
Speaker 1: pay tax on the money that's going out when it
Speaker 1: is paid like for medical funds, the earnings aren't tax.
Speaker 1: But also it's the only account where you can avoid
Speaker 1: the FICA tax or I don't know if it's considered
Speaker 1: a tax, but um, so that's fun to Social Security
Speaker 1: and Medicare, so the funds that it's a small percentage
Speaker 1: that's taken out still even if you contribute to four
Speaker 1: one K, but not so for a h s A,
Speaker 1: So that's also something to look at. Hs A is
Speaker 1: have a pretty low annual max, so if you are
Speaker 1: able to use one, I would definitely look into it.
Speaker 1: If you're a company or wherever you have, if the
Speaker 1: high deductible healthcare plan that you have doesn't have an
Speaker 1: hs A, look into if you're still eligible for one,
Speaker 1: because you could be eligible for one, it's just not offered.
Speaker 1: If so, you can find a separate h A company.
Speaker 1: We like a company called Starship, not just because I
Speaker 1: like Star Wars and Star Trek, but Starship is a
Speaker 1: really great um H a company that has low fee
Speaker 1: index funds in their investment portions. So you can hit
Speaker 1: up Frugal Friends podcast dot com slash Starship and see
Speaker 1: if you can get one there. Oh that's so fun. Yeah,
Speaker 1: slash Starship, slash Starship. I know, I don't. Usually these
Speaker 1: tech companies have the worst names, So I don't know
Speaker 1: like where Starship came from. It's just it's gold the
Speaker 1: next one on this list, and I think this is
Speaker 1: where we're going to get most of our nuance is
Speaker 1: use your side hustle to claim business deductions. And so
Speaker 1: if you're using if you're doing this, you really really
Speaker 1: should be using a professional to do your taxes. It
Speaker 1: is is highly recommended because there's so many things that
Speaker 1: could be written off that you maybe didn't know about
Speaker 1: or maybe too scared to write off on your taxes
Speaker 1: because you're just not sure like in what capacity you
Speaker 1: qualify for it, and and an tax professional can very
Speaker 1: much help you determine if you can write those things
Speaker 1: off in what percentage and so on, and they typically
Speaker 1: pay for themselves in that case. So I had as
Speaker 1: when I was a doing business as UM company before
Speaker 1: I became an LLC, all of that stuff was just
Speaker 1: included on my personal tax, the personal tax report, and
Speaker 1: so I didn't have to pay extra for a separate
Speaker 1: business tax filing. So that is that was my experience.
Speaker 1: I know that it's not like that in every state,
Speaker 1: but yeah, so don't be worried about telling like using
Speaker 1: an accountant and telling them that you have a side hustle.
Speaker 1: And if you're a frugal friend, you most likely do
Speaker 1: have some sort of side hustles. So if you've made
Speaker 1: money in any way other than through your work where
Speaker 1: you are in a W two employee, this is definitely
Speaker 1: something to be keeping track of, and attacks professional will
Speaker 1: be able to help you identify the things that you
Speaker 1: can write off. Of course, if you are able to
Speaker 1: talk to someone throughout the year, you can have better
Speaker 1: chances of keeping good track of the things that can
Speaker 1: be right offs, rather than trying to backtrack at the
Speaker 1: end of the year in trying to remember what all
Speaker 1: did you buy and spend all these things. But certainly
Speaker 1: if you've got any kind of side hustle, it's a
Speaker 1: great way to be able to write off various parts
Speaker 1: of your life that are connected to that side hustle. Yeah,
Speaker 1: and don't think just because you it's not entirely for
Speaker 1: business purposes, you can't write it off, because they you
Speaker 1: can write off percentages of things, so that Yeah, And
Speaker 1: and working with a professional will very much help you.
Speaker 1: And even using a bookkeeping software will help you kind
Speaker 1: of keep track of it too. I know I have
Speaker 1: full disclosure Jill, and I love spreadsheets. So I've been
Speaker 1: doing the books for frugal friends entirely on spreadsheet and
Speaker 1: it has been the bane of my existence. And so
Speaker 1: this is the first year I'll be using attack or
Speaker 1: a bookkeeping software, and I think it's going to make
Speaker 1: my life at tax time eleven times easier. It's at
Speaker 1: least gonna save me a few hours a month on
Speaker 1: on keeping all of these deductions in line. Yeah, there
Speaker 1: comes a time when you graduate to something, something better,
Speaker 1: something new. The next one on this list is related
Speaker 1: to the side hustle piece, that you could claim a
Speaker 1: home office deduction. Again, this is only if you have
Speaker 1: a side business. I know that a lot of people
Speaker 1: have been working from home. If you are a W two,
Speaker 1: I don't believe that you can write off your office.
Speaker 1: Hopefully your work is still taking care of you. But
Speaker 1: if you have a side hustle and you have a
Speaker 1: dedicated space for a home office, that can often be
Speaker 1: deducted as well. Even things from um percentages of your
Speaker 1: rent or utilities can go towards the home office deduction. Again,
Speaker 1: ask your tax preparer about this. But that's another way
Speaker 1: to save I know for us. So in two thousand nineteen,
Speaker 1: both Eric and I were self employed, so we did
Speaker 1: not have a W two. We basically had our own businesses,
Speaker 1: and our tax prepared told us that we were even
Speaker 1: able to write off renovations on our dedicated office spaces.
Speaker 1: So I keep track of the upgrades that we do
Speaker 1: specifically in our home offices, and that too as a
Speaker 1: text deduction. So that's great because I already want my
Speaker 1: house to look better and it's a tax deduction for me. Yeah,
Speaker 1: and there's so many things that you for those of
Speaker 1: us who don't itemize, you can't write off, like charitable
Speaker 1: deductions are charitable donations like lower down on this list,
Speaker 1: you you can't write those off if you don't itemize,
Speaker 1: But if your business makes a charitable donation, that can
Speaker 1: be written off. So obviously you want to do this ethically,
Speaker 1: but it just makes so much sense to have something
Speaker 1: on the side, no matter how small it is, so
Speaker 1: that you can take advantage of these deductions that are
Speaker 1: legal and are used ethically. So the next real one.
Speaker 1: So we won't go through every single one on list
Speaker 1: because some of them are for itemized UM or itemized
Speaker 1: text you know words. But so this one you if
Speaker 1: you're using tax software, this should do this for you
Speaker 1: automatically UM. But to deduct half of your self employment taxes. Uh.
Speaker 1: So I talk about this one because the article doesn't.
Speaker 1: So it says the government assesses a fifteen percent fight
Speaker 1: attacks like I was talking about with the around the
Speaker 1: h s A on all earnings, except for it is
Speaker 1: not charged on earning on contributions made to the h
Speaker 1: s A. So while employers split the cost with their workers,
Speaker 1: if you're self employed, you have to pay the whole thing.
Speaker 1: But you can get around this by if you are
Speaker 1: self employed, registering for um an LLC and then registering
Speaker 1: as an escorp. And you have typically until March to
Speaker 1: do this, sometime in March to elect an escorp and
Speaker 1: that that is free. It does cost to become an LLC,
Speaker 1: but it's a very low amount. And then you can
Speaker 1: pay yourself a salary every month and your I mean
Speaker 1: I professionally can tell you what, but but typically people
Speaker 1: recommend thirty five to fort of your earnings and you
Speaker 1: can just pay yourself just deduct those taxes on the
Speaker 1: salary that you are paying yourself, so you instead of
Speaker 1: paying the fifteen on everything that comes in, your only
Speaker 1: paying on what you're paying your salary as So you
Speaker 1: can save a lot of money once you start increasing
Speaker 1: your earnings from your side business. So I think some
Speaker 1: people say once you start earning around sixty dollars a year,
Speaker 1: it's a good time to elect as an escorp. And
Speaker 1: you can find more information about that online. But that's
Speaker 1: a really great way to lower your taxes if you
Speaker 1: are self employed. Yeah, that's an sample of one that
Speaker 1: I was not aware of I found helpful on this one.
Speaker 1: Although now both Eric and I are moving towards being employees,
Speaker 1: so that's self employed. Some of those self employed benefits
Speaker 1: aren't going to be there anymore, but it'll be better
Speaker 1: in the long run. The next tip, so moving away
Speaker 1: from having side hustles back to just what might be
Speaker 1: available for anybody, is getting credit for higher education. So
Speaker 1: the government does offer tax credits to offset the cost
Speaker 1: of higher education. Of course it's it's not a ton
Speaker 1: don't get your hopes up, friends, um, but you they
Speaker 1: do provide for a maximum credit of dollars per student
Speaker 1: per year, So definitely be aware of what's available to
Speaker 1: you if you are currently a student, and I believe
Speaker 1: that this would be whether you're whether you're part time
Speaker 1: or full time. Of course, the credit may differ depending
Speaker 1: on what kind of student you are, but be aware
Speaker 1: of that. Also, keep track of costs for your books, tuition,
Speaker 1: all of the things. Um, those those are all helpful
Speaker 1: when when tax time comes. Yes, absolutely so. There are
Speaker 1: a few other things on this list, um specific too.
Speaker 1: If you have state and city taxes, to definitely look
Speaker 1: at your state and your city to see what kind
Speaker 1: of tax deductions they provide or tax breaks. A big
Speaker 1: one is if you have children and your state may
Speaker 1: give you uh contributions to a five twenty nine in
Speaker 1: that state are often times um deductible for state tax.
Speaker 1: Like we don't in Florida, don't have a state tax,
Speaker 1: so we can use any five twenty nine in any state.
Speaker 1: But if your state gives tax breaks, you might want
Speaker 1: to stick to the five twenty nine in your state.
Speaker 1: So that's another way. If you're going to be doing
Speaker 1: a five twenty nine for your children any way, see
Speaker 1: if your state has tax incentives for using the in
Speaker 1: state one, and then like private mortgage insurance, your tax
Speaker 1: software should do that for you. So don't throw away
Speaker 1: that form you get from your mortgage company because p
Speaker 1: m I is deductible. And that's another I mean, if
Speaker 1: you can't put down on a home and you're scared
Speaker 1: of p m I, and it's just another reason, don't
Speaker 1: be as afraid of p m I as some people
Speaker 1: might tell you too, because it is deductible. I mean,
Speaker 1: tax code is tax code changes every single year or
Speaker 1: so of course keep that in mind too. Write talk
Speaker 1: to your tax preparer, who's going to be updated on
Speaker 1: the most recent code because deducting p m I has
Speaker 1: gone in and out throughout different years. So sometimes you can,
Speaker 1: sometimes you can't. They like to keep us on our
Speaker 1: toes always, always they overlook the big like sweeping tax
Speaker 1: reformed it could do and just like Pitter pattern with
Speaker 1: their y p m I. It's fun, you know, it's fun.
Speaker 1: It's great so that we have to hire people because
Speaker 1: it's so complicated. And of course the last thing on
Speaker 1: here for me is the making charitable donations of course
Speaker 1: for anybody that is deductible and wherever you do donate,
Speaker 1: to make sure that you get the receipt for that
Speaker 1: indicating your ability for tax deduction. Absolutely all right, So
Speaker 1: our next article is going to be how to boost
Speaker 1: your tax refund. I know we said we wouldn't talk
Speaker 1: about it, but we're gonna talk about a little. It's
Speaker 1: just five hidden ways to boost your tax refund. And
Speaker 1: these are just like practical things that not a lot
Speaker 1: of people may know about, just little facts that you
Speaker 1: may want to use for your tax filings. So this
Speaker 1: is not going to help you a lot with your
Speaker 1: next tax refund, sorry, but there are things you can
Speaker 1: start maybe doing now for your next one. This might
Speaker 1: be especially important if you owe taxes this year, then
Speaker 1: you'll definitely want to take these things into consideration so
Speaker 1: that you at least don't Oh, so you're not surprised
Speaker 1: with a tax bill. What do you think of this one, Jill? Oh, great,
Speaker 1: super digestible. I love it when there's just something like
Speaker 1: five tips like this one effect. Yeah, and we'll go
Speaker 1: through them all. Uh. So, the first one is rethink
Speaker 1: you're filing status, and so there's two things to be
Speaker 1: aware of. If you are married, it may beho view
Speaker 1: to file separately. So this status often requires more effort
Speaker 1: but could benefit you and tax savings. So under the
Speaker 1: right conditions, For example, if one spouse has a lot
Speaker 1: of medical expenses such as COBRA payments resulting from a
Speaker 1: job loss, computing taxes individually might allow for a larger deduction.
Speaker 1: So if you're working with a professional, they will tell
Speaker 1: you this. But I had no clue that something like
Speaker 1: a bunch of medical expenses could make it better to
Speaker 1: file separately. The other one is for separated parents. So
Speaker 1: there's a child tax credit. You know this, but both
Speaker 1: parents can actually be like you can get that. So
Speaker 1: if you file as head of household, each parent can
Speaker 1: get like half is what I was reading. That's not
Speaker 1: in this article. But if you have a child, and
Speaker 1: I'm sure custody kind of comes into play on this
Speaker 1: as well, but you can do that for the child
Speaker 1: tax credit. That is something to look into see if
Speaker 1: it applies for your situation. And then that would require
Speaker 1: you too. I'm not sure. Maybe you would have to
Speaker 1: file Mary filed separately if you just got separated. That's
Speaker 1: and then head of household. So this is something I
Speaker 1: didn't know. If you are taking care of a family member,
Speaker 1: so whether it's a child or a parent, or or anyone,
Speaker 1: and you are taking care of them at a certain point,
Speaker 1: if you take enough care of them monetarily, you can
Speaker 1: be considered head of household for them and that helps
Speaker 1: you with your taxes. If you are taking care of
Speaker 1: a parent or family member, then look into how you
Speaker 1: are filing and see if it will behoove you to
Speaker 1: change to a head of household instead of single. This
Speaker 1: is specifically for single people. Those are kind of the
Speaker 1: two married finally separately and head of household can kind
Speaker 1: of help you if you're in some unique situations, there's
Speaker 1: a reason to take care of your parents. There you
Speaker 1: go more than just because they took care of you. Uh.
Speaker 1: The second tip on here is to embrace tax deductions.
Speaker 1: Some of these we may be more aware of than others.
Speaker 1: They just give a quick list of some that most
Speaker 1: people might be able to take advantage of, maybe even
Speaker 1: less commonly known. So there's things like state sales tax,
Speaker 1: so you can use the I R s as calculator
Speaker 1: to determine how much of your state and local taxes
Speaker 1: you can deduct. Reinvested dividends they say it's not technically
Speaker 1: a deduction, but it can you reduce your overall tax liability.
Speaker 1: When you automatically have dividends from mutual funds that you've reinvested,
Speaker 1: you can include that in your cost basis. Also out
Speaker 1: of pocket charitable contributions. We already talked about that one
Speaker 1: student loan interests, so whatever you've paid in interest on
Speaker 1: your student loans could also be a tax deduction. And
Speaker 1: child and dependent care, so speaking to what gen referenced
Speaker 1: too in the first one of whether you're caring for
Speaker 1: an elderly family member or a child, the cost of that,
Speaker 1: the expenses qualifying expenses for caring for those dependents, can
Speaker 1: also be deducted. Yeah, and these are things that your
Speaker 1: tax software will tell you about so you don't have
Speaker 1: to worry about missing them. Yeah. Also certain jury duty fees,
Speaker 1: so if you if you do answer all of the
Speaker 1: questions and the exact right order, and you land yourself
Speaker 1: on on a jury. Uh, some of that can be
Speaker 1: a tax deduction. Medical miles so as in like car
Speaker 1: mileage that is associated with medical needs could also be deducted.
Speaker 1: Miles that you put on your car associated with charity
Speaker 1: if you volunteer at any place. So just yeah, lesser
Speaker 1: known things that we can keep in mind and keep
Speaker 1: traffic throughout the year. Our hope is that you'll hear
Speaker 1: these unique situations and not realize you're in a unique situation.
Speaker 1: You think you're just in a normal situation. But if
Speaker 1: you hear it and you're like, oh, yeah, I do that.
Speaker 1: Oh that's unique. Oh maybe I should have somebody look
Speaker 1: in to see if I can pay less in taxes.
Speaker 1: So that's our goal with kind of like just piquing
Speaker 1: your interests. They're unique, so they are not going to
Speaker 1: apply to everyone. But hopefully at least one thing in
Speaker 1: this episode you'll be able to take and reduce some
Speaker 1: of your tax burden. So then the next one on
Speaker 1: this one is we were just talking about maximize your
Speaker 1: IRA A and h S A contributions, and I guess
Speaker 1: we would say the same with four O one K,
Speaker 1: but actually for your IRA, you can put money into
Speaker 1: it up until the tax date, so in it is February,
Speaker 1: you can still be contributing to your one I R
Speaker 1: and there are limits and stipulations to be able to
Speaker 1: deduct like make those tax deductible like currently where it's
Speaker 1: much more like free in the RATH area. You just
Speaker 1: know whatever you put in there is tax now and
Speaker 1: tax free later. But so look into what these stipulations
Speaker 1: are for having the contributions to a traditional IRA tax
Speaker 1: deductible now, but you still can contribute and get some
Speaker 1: of that tax burden off up until the tax date. Yeah.
Speaker 1: The fourth on here is to use timing in your
Speaker 1: favor to boost your tax refunds. So they're particularly advocating
Speaker 1: that we be looking for payments or contributions that we
Speaker 1: can make before the end of the year that will
Speaker 1: reduce our taxable income. A couple of things that they
Speaker 1: advocate for. I don't know how much of a difference
Speaker 1: this would actually be on your taxes. But maybe if
Speaker 1: you were in a really weird triple tax situation or
Speaker 1: you had a really weird year, then yeah, making January's
Speaker 1: mortgage payment by December thirty one so that you can
Speaker 1: get the added p M i uh interest added to
Speaker 1: I don't know how much that that would actually help you,
Speaker 1: but they're trying to get you to think through what, yeah,
Speaker 1: what you can be spending on at the end of
Speaker 1: the last cord or to be able to, like they said,
Speaker 1: reduce your taxable income. And this is why you definitely
Speaker 1: see an uptick of charitable contributions at the end of
Speaker 1: the year. It's not just that everyone's feeling super generous,
Speaker 1: it's also that people want to reduce their taxable income.
Speaker 1: So whether it's being generous, which is great, or if
Speaker 1: you want to schedule you know, you've got medical expenses
Speaker 1: coming up and you want to get those in before
Speaker 1: the end of the year so that it can add
Speaker 1: to your medical expense deduction. Kind of anything that we
Speaker 1: listed off so far that you might want to consider
Speaker 1: by the end of the year to see a lower
Speaker 1: lower amount that you pay in taxes. Yeah, it's just
Speaker 1: like if you're able to claim the home office deduction,
Speaker 1: you can even deduct the cost of painting your home
Speaker 1: office if you want to start the new year with
Speaker 1: a fresh look. And and I've always been of the
Speaker 1: mind like even if it's tax deductible, it's not deductible,
Speaker 1: like in like in Ship's Creek when David's like buying
Speaker 1: the face cream and they're like, who pays for it?
Speaker 1: I don't know exactly. I think that can be sometimes
Speaker 1: how people approach tax deductions, Like you're still buying it.
Speaker 1: It's not suddenly free. It just could reduce your taxable income,
Speaker 1: but you still have to buy the thing, and so
Speaker 1: still make sure that you have the money to buy
Speaker 1: the thing. Yeah, and I don't think a can of
Speaker 1: paint is going to like break your verse. Uh. You know.
Speaker 1: The only thing is if you're super unorganized and you
Speaker 1: want to remember and keep the receipt that it might
Speaker 1: you know, be in your best interest to do the
Speaker 1: things in December so you're not buying it in January
Speaker 1: and like digging around for the receipts next year. That
Speaker 1: that would be the biggest benefit I would see. So
Speaker 1: the last one on here is to become tax credit Savvy,
Speaker 1: and again, most of these are going to be in
Speaker 1: any tax software. I mean this is from Turbo tax,
Speaker 1: so like if you're using turbo tax, isn't an ad
Speaker 1: for that, but obviously it's all going to be in
Speaker 1: that software. So I wouldn't worry about these things. But
Speaker 1: know that there is an earned income tax credit, and
Speaker 1: the software will calculate if you meet the guidelines for
Speaker 1: that if you have no qualifying children, Like the max
Speaker 1: credit amount is liked for that one, but it can
Speaker 1: go up to like sixty seven hundred and more kids.
Speaker 1: There you go how to save money on taxes. Frugal
Speaker 1: friends say have a ton of kids. That's stuff from
Speaker 1: the frugal friend that has zero children. And there's the
Speaker 1: Child Independent Care Credit. Yeah right, so that is surely
Speaker 1: going that's a going to change for tax or two.
Speaker 1: But it's you know, you get what you get right now.
Speaker 1: If you took the half payments throughout last year, then
Speaker 1: you have those. If you didn't, then they will show
Speaker 1: up on your taxes this year. But there are there
Speaker 1: are some interesting ones like the American Opportunity Credit as
Speaker 1: for college students or people supporting a child in college.
Speaker 1: There's also the Lifetime Learning credit, so you can go
Speaker 1: ahead if you are in college or have a college student,
Speaker 1: you can go ahead and like kind of google the
Speaker 1: education credits, education tax credits and see kind of what's available. Uh.
Speaker 1: And then energy saving home improvements, So there's a lot
Speaker 1: I know now in a Florida for solar, but then
Speaker 1: you also have to kind of do the math on
Speaker 1: if the cost of solar and the amount of time
Speaker 1: you're going to stay in your house all of that
Speaker 1: kind of makes it worth it. So these are just
Speaker 1: things that are not You shouldn't just do it because
Speaker 1: you get a tax credit, but if you want to
Speaker 1: do something, then it kind of can put you over
Speaker 1: the edge in that. But some of the credits are
Speaker 1: kind of stretching it. Credit for electric vehicles that might
Speaker 1: be something. If you want an electric vehicle, then the
Speaker 1: I R S is still offering up to per qualifying
Speaker 1: vehicle for so stuff like you you kind of already
Speaker 1: have to want it and be able to budget for
Speaker 1: it and then just get a little helpful it from
Speaker 1: the gov. Mm hmm, well, you know what, you don't
Speaker 1: need a little extra help for um and that nobody
Speaker 1: but us is going to provide for you. You can't
Speaker 1: you can't write this off. H that's right, It's time
Speaker 1: for the best minute of your entire week. Maybe a
Speaker 1: baby was born and his name is William. Maybe you
Speaker 1: paid off your mortgage, Maybe your car died, and you're
Speaker 1: happy to not have to pay that bill anymore. Tough bills,
Speaker 1: Buffalo bills, Bill Clint, this is the bill of the week.
Speaker 1: Hey Jen, Hey Jill. My name is Natasha. I'm a
Speaker 1: new listener and I have binged your podcast for the
Speaker 1: last week or so. I love the content that you
Speaker 1: put out. Um, my bill of the week is my
Speaker 1: Christmas bill. So recently I listened to one of your
Speaker 1: podcast episodes about repurposing, reusing, and recycling, and it has
Speaker 1: inspired me to do just that for our Christmas gifts
Speaker 1: this year for all of our family and fronts. So
Speaker 1: although we don't have an actual bill that we get
Speaker 1: for Christmas, it is going to reduce the amount that
Speaker 1: we have to spend on our Christmas. So we had
Speaker 1: this big box of items that we were just going
Speaker 1: to go ahead and send to the donation center, and
Speaker 1: instead I went through the box. So far, I've been
Speaker 1: able to create about nine gifts out of all of
Speaker 1: the items that were in there. I'm super excited about it.
Speaker 1: I'm not really crafty, but I'm trying my hand at
Speaker 1: it because I've figured we have the items here, why
Speaker 1: not use them? So um, and it's only September. There's
Speaker 1: surely more that we can create out of all of
Speaker 1: the items laying around our house. So I just wanted
Speaker 1: to thank you for inspiring me to do that, for
Speaker 1: helping us save on our Christmas bill, and just also
Speaker 1: thank you for the content that you put out and
Speaker 1: love it. Keep it up, Wow, Natasha, Yes hashtag normalized
Speaker 1: secondhand gifts. I want that on a T shirt. Oh well,
Speaker 1: and also so sorry that you recorded this in September
Speaker 1: and we're playing in February. That's how behind we are,
Speaker 1: and that's how excited our listeners are about But we
Speaker 1: do play every single bill, so it will get played,
Speaker 1: don't worry. That's why it takes so long. That is amazing, though,
Speaker 1: and I would love to see what you ended up
Speaker 1: coming up with, because it sounds like not only did
Speaker 1: you just give something on as a gift, but you
Speaker 1: maybe made some changes to different items to repurpose them
Speaker 1: and then regift them. Super curious about that anyhow, feel
Speaker 1: free to update us on some of your your top
Speaker 1: re gifts in our Football Friends community group on Facebook.
Speaker 1: Because even if it's not the holidays, birthdays and other
Speaker 1: types of celebrations happen, so we love to have ideas
Speaker 1: on how we can be kind and generous but not
Speaker 1: have to spend a ton of money either, especially if
Speaker 1: we don't have it. So yeah, I love that tips,
Speaker 1: So glad it was helpful. Natasha. We have a gift closet,
Speaker 1: so we I mean it's not the whole closet, but
Speaker 1: we have a closet in my office and we will
Speaker 1: put stuff like that into the closet and gifts we
Speaker 1: receive at Christmas that we don't really want to go
Speaker 1: into the closet, so that during the year, if we
Speaker 1: have a birthday party or like congratulatory like book book launch, uh,
Speaker 1: you know, stuff that in life that is really celebratable,
Speaker 1: and we can go into the gift closet and grab
Speaker 1: gifts because I am so about regifting and gifting secondhand
Speaker 1: and by nothing groups are a great used to find
Speaker 1: some gift things too, So thank you so much, Natasha.
Speaker 1: We have a similar gift closet and actually Jen, I
Speaker 1: just came across a gift for Travis's birthday, holding on
Speaker 1: to it. I'm looking at it right now. I don't
Speaker 1: get too excited, don't get too excited. But it costs
Speaker 1: me nothing and he will get it on his birthday.
Speaker 1: All right. Well, if you have a bill, if it
Speaker 1: has to do with bills you didn't have to pay,
Speaker 1: or regifting or you know, you know the drill literally
Speaker 1: anything related to bill, visit Frugal Friends podcast dot com
Speaker 1: slash bill, leave us your bill. Eventually we'll get to it. Yea,
Speaker 1: And now it's time for cute. I got told that
Speaker 1: they wanted they wanted noises again. People in our membership
Speaker 1: group like what happened to the noises? And I'm like,
Speaker 1: you mean what I did with my mouth? I can
Speaker 1: bring that back. People literally asked for the mouth noises
Speaker 1: back and I sat there stunned. Um. But anyways, today
Speaker 1: we are sharing how we personally save on taxes as
Speaker 1: normal people who don't make like millions of dollars more
Speaker 1: yeah than of thousands. Yeah yet I guess sure, go
Speaker 1: for it, Jen, How do you do this legally? So
Speaker 1: I started my business in twenty sixteen, so kind of
Speaker 1: was the first. It was in the end of Seen
Speaker 1: was like the first year that I had a business.
Speaker 1: And it took one year for me to realize that
Speaker 1: having a business increases your tax liability and that they
Speaker 1: don't just take taxes out. And so I had to
Speaker 1: stop using a tax software and moved to an accountant.
Speaker 1: And this guy worked his magic and saved me so
Speaker 1: much money on like what I thought I was going
Speaker 1: to have to pay, and he more than paid for himself.
Speaker 1: And that is why I am a great advocate of
Speaker 1: paying for services that will pay for themselves because it
Speaker 1: saves me time and stress. And we use this guy
Speaker 1: every year and he's great. He has a fishing pole
Speaker 1: and between clients he will just go to the pond
Speaker 1: behind his office and fish for like, you know, five
Speaker 1: ten minutes. And and that's the kind of accountant you want,
Speaker 1: right like that is it. He is everything. I tried
Speaker 1: for him to be my accountant, but he wasn't having it.
Speaker 1: He because of because of the caliber of accountant he is.
Speaker 1: You can imagine he did not take new clients last year. Well,
Speaker 1: he didn't take new clients last year because last year
Speaker 1: was crazy. But it's a new year. It was still crazy.
Speaker 1: They I This is my opinion. I think that they
Speaker 1: make the tax could so complicated so that you have
Speaker 1: to hire somebody. I'm convinced that if you don't know,
Speaker 1: if you have not studied this for four years in
Speaker 1: like graduate school, that you're not going to be able
Speaker 1: to save as much money as you could if you
Speaker 1: hired somebody. I don't. I mean Eric and I have
Speaker 1: done our own taxes for many years, and finally, yeah,
Speaker 1: we we were in a complicated situation where we just
Speaker 1: hired somebody and they did. They saved us a ton
Speaker 1: of money. So, like you're saying, Jen, it more than
Speaker 1: paid for itself to hire somebody. Of course, not if
Speaker 1: you are a standard W two employee that that's pretty
Speaker 1: straightforward to be able to do your own taxes. But
Speaker 1: if you've got a side hustle, if you're self employed,
Speaker 1: don't waste your time, just hire somebody. Yeah, I was
Speaker 1: still a side hustle Inenen. I didn't go full time
Speaker 1: until nineteen, so I was I was definitely using him
Speaker 1: while I had the side hustle, for sure. So for me,
Speaker 1: you want to know how I saved on taxes, like
Speaker 1: your's a lot I moved to Florida, where I don't
Speaker 1: have to pay state and local income tax anymore. Yes,
Speaker 1: it's in all caps. Yes, if you read our show notes,
Speaker 1: it's in all caps because I am that excited about it.
Speaker 1: I feel like I found the biggest most legal loophole
Speaker 1: in the entire nation. And it's amazing. And you know what,
Speaker 1: this is going to be the first year that I
Speaker 1: fully get to enjoy that reality. We moved in twenty
Speaker 1: twenty mid so when I did my taxes that year,
Speaker 1: I still had to pay a Pennsylvania They still had
Speaker 1: a grip on me. But this year, all of one baby,
Speaker 1: we were in Florida, and it will save me between
Speaker 1: six to eight thousand dollars. Wow, at least, like, at
Speaker 1: least conservatively, I will not have to pay that amount
Speaker 1: of money. That real money that came out of my
Speaker 1: pocket I get to keep just because I made the
Speaker 1: very smart, very wise decision to move to greener pasture. Yeah.
Speaker 1: I don't usually say this publicly, but like, come on
Speaker 1: down to Florida, like it's it's really a free for
Speaker 1: all here and and we like it. So I don't
Speaker 1: say that to people, but like, if your list, if
Speaker 1: you're a Frugal Friends listener, Like you're a good person,
Speaker 1: and so I will say it to you. But like
Speaker 1: otherwise I would be like, don't say anything, Jill, because
Speaker 1: everybody is moving to Florida and it's very obviously because
Speaker 1: of the tax situation. Now listen, Florida is not the
Speaker 1: only state who does that. So you know you could
Speaker 1: you could go to another state that doesn't require state
Speaker 1: and local. It's not as good of a state, but
Speaker 1: like it's right state ag and listen. If we're trying
Speaker 1: to keep it to ourselves, then well not for frugal friends.
Speaker 1: There's no sunshine or water year round here. It's not
Speaker 1: it's not all it's cracked up. We don't have There
Speaker 1: are alligators. They're awesome, but there are alligators for a
Speaker 1: strong word. But thank you so much for listening. We
Speaker 1: want to thank you for your kind reviews of the
Speaker 1: Alligators and the podcast like this one. This one is
Speaker 1: of us and it happens to be five stars from
Speaker 1: year one, eight to nine. It's very helpful and valuable.
Speaker 1: You ladies are a godsend. I'm in my fifties and
Speaker 1: came up in the school of Susie Orman and Dave Ramsey.
Speaker 1: I could never live by their rules. I've had many
Speaker 1: depression bow and self esteem battles from being unable to
Speaker 1: stick to a budget, pay off, debt, and save. It's
Speaker 1: been a journey of successes and failures and lots of
Speaker 1: mental anguish. But listening to YouTube, especially your values based
Speaker 1: budget episode, I now have the language the words that
Speaker 1: fit who I am. I could go on, but I
Speaker 1: don't want to bore you. I just want to say
Speaker 1: thank you and keep it coming. I'm a huge fan
Speaker 1: be well. That gives me heart flutters in a good
Speaker 1: way to to see that transfer. Everybody should feel confident
Speaker 1: about their finances, no matter where they are, because we
Speaker 1: are all on a journey to getting better and and
Speaker 1: you deserve confidence on that journey. Yeah. The thing that
Speaker 1: stands out to me and her review is that she
Speaker 1: now has the words to put to her journey, which
Speaker 1: I think is so important for whatever journey we're on, financial, mental, relational,
Speaker 1: all of the things. I think having a language and
Speaker 1: terminology to be able to describe and name is so
Speaker 1: important for seeing successes in that journey. Well well done,
Speaker 1: We're so glad you found us too. We also want
Speaker 1: to thank our friends who share these episodes on social media.
Speaker 1: So when you share the latest episode on Instagram specifically,
Speaker 1: we're adding you to our monthly drawing. For every five
Speaker 1: tags and reviews week at each month, we're giving away
Speaker 1: fifty dollars five zero big bucks for you to spend
Speaker 1: in the Frugal Friends shop. So keep leaving us those reviews.
Speaker 1: Where have you listen to podcasts? Sending the screenshot to
Speaker 1: reviews at Frugal Friends podcast dot com, and don't forget
Speaker 1: to tag us on social See you next week. Frugal
Speaker 1: Friends is produced by Eric Syrian jen. I think I've
Speaker 1: told you this before, but I actually get really excited
Speaker 1: for tax time because well, because both Eric and I
Speaker 1: have been self employed for like most of our marriage,
Speaker 1: and so taxes don't automatically come out of our paychecks.
Speaker 1: So we have to make sure that we set aside
Speaker 1: the money for taxes, and I do that with every
Speaker 1: paycheck that we do receive. I set aside more than
Speaker 1: what I imagine, right, I estimate that we'll have to
Speaker 1: pay about sevent of our income in taxes. So I
Speaker 1: put away of both of mine and Eric's paychecks, and
Speaker 1: so that means that when I do finally pay taxes,
Speaker 1: I get a nice little this little bonus, nice you know,
Speaker 1: extra chunk of change. So I'm always like, I'm always
Speaker 1: on top of it. Now that we work with an
Speaker 1: accountant to prepare our taxes. Um, I said them emails
Speaker 1: like months ahead of time, like are you still ready
Speaker 1: for me? What's the soonest I can get my information?
Speaker 1: Do you I'm to go. I've got all my spreadsheets
Speaker 1: and and then I pay my taxes and then I
Speaker 1: and then I get to do what I want with
Speaker 1: my fun money. And then I am not ready for
Speaker 1: you with the frugal friends money. I will get ready
Speaker 1: in three days. In three days, I will be paying
Speaker 1: you know what. It's your loss too, because this year
Speaker 1: that money is going towards renovations. So you hate the
Speaker 1: dumpster fire as much, if not more than I do
Speaker 1: dumpster fire kitchen, that you're only going to hurt yourself.
Speaker 1: I know, I know. I'm I'm here for you. I
Speaker 1: am for you and myself because I need to. I
Speaker 1: need my money. Happy taxes