As a high w2 earner. I am jealous of folks who get write off shit loads of capex using big beautiful bill bonus depreciation. I am curious how a w2 earner can offset their taxes. I know in theory but I am curious about if someone executed actual this. I see charity write offs. I see short term rentals. I want to know if there are anything else.
No. Tax codes are written for business owners. r/whitecoatinvestor might have some ideas, but if you want to write anything meaningful off, you need to own a business.
Thats an interesting sub reddit. Thank you.
There is not much if anything can do as high income w2 earner. In fact, high income W-2 earners carry 70% of the tax burden in America. We literally keep the lights on. And I love how we get dropped in the same class as “wealthy” who pay almost no tax on passive equity wealth.
Had a friend from HS tell me her and hubby made $440,000 this year, all from W-2 wages and she didn’t believe me that maxing out 401k and HSA was the only way to bring their income down.
Literally, there is nothing available for high w-2 earners.
If they have a high mortgage, interest on the mortgage is deductible (up to $750,000 loan). If you have a 6-7% loans you’re looking at ~$50,000 in tax deductions per year. Also, SALT deductions. Add in max 401k and family HSA and it’s not too bad.
It isn’t 50k per year, interest burden decreases over time.
This ☝️, and it’s not dollar for dollar like a credit operates. It’s a deduction so it’s only a percentage of what you paid. If you paid $40k in mortgage interest you are only getting a percentage of that.
Yes interest is front loaded on amortization so you get bigger deduction in the early years. I would not rely on this forever but if you happen to have a mortgage and high w2 income, it doesn’t hurt. Or perhaps instead of doing w2, go for a 1099 and look for C2C contracts, create LLC and tax it as an S corp.
You can’t do this if you are in fact a full time worker. IRS does not like it and will reclassify you. Usually the business you work for gets hit with the reconciliation tax bill and they like that even less. So no employer will do this. If you own a business and you do this with employees - you’re asking for it.
Not sure what situation you would be able to be 1099 as a full time worker. That is squarely w2 and you will get reclassified if it is attempted work around.
Benefit is limited. What expenses are you writing down.
That’s not really anything special tho.
This doesn’t seem correct at all. You cannot write down full interest amount.
This is legit and hopefully you are using it on your taxes if you have a high mortgage and high interest rate… beats the standard deduction. You’re only deducting what you pay in interest for the tax year for your primary residence.
I have a CPA for this… there is no way was able to write it all down
You can’t write it all down, it’s capped at $750,000.
I went and looked. It was because of the SALT cap that was unable to write it
If you itemize, the interest you paid can be added to the other itemized deductions up to 750k mortgage.
The standard deduction for married filing jointly this year is $31,500.
I have a $700k mortgage @ 5.6%. I paid $38k in interest this year.
I also paid $10,000 in state income taxes and $6,000 in property taxes.
This is $54,000 in deductions, compared to the $31,500 standard deduction... So for me, it makes sense to itemize. By itemizing (thanks to the mortgage interest deduction, which is the only reason it makes sense) I get back an extra $5k = ((54k - 31.5k) * .22)
Curious what year of repayment are you at with the mortgage? I have a $550k mortgage at 6.4% and paid about that in interest. Could be the rate difference too. Absolutely disgusting amount of interest a taxes paid in 2025. Taxed on tax ha. I guess it was the SALT cap that was keeping the mortgage interest off the board.
Also if you're both single you can both claim 750k each
Yes max 401 is basically most of what can do.
Because you don’t know the tax code
I ended up buying a business. Best thing I ever did. Used it as a write off but it grew significantly with a business manager in place. Ended up being able to quit my w2
Wow this is the dream! What type of business was it?
An auto shop, then a shrink wrapping company, and then a construction company. Hopefully no more
Good for you!
Out of curiosity what was your initial investment and then cash flow per month? I have been trying to find a way to diversify away from stocks/bonds/a little crypto and real estate isn't worth it as current interest rates. Tried multiple times and can only get minimal cash flow and that's making a lot of favorable assumptions.
I started my own digital business this year/app as a side hussle (very unlikely to succeed) but just incurred about 4K in costs and learning a lot so it's worth it - plus according to ChatGPT I can get about 1/3 back in taxes.
It’s been a while but my initial investment was about 20k to secure financing, then about 30k to put into the business account for continued operations. It was negative 4k the first month, which I didn’t think was too bad. Turned positive about 4 months in. When I was working w2, I’d take home about 7k a month, it’d be positive 8-10k. Since I’ve been giving it more attention since quitting w2, it’s grown to 15-25k a month. I take home about 12 from it. This is all the auto shop.
How did you find businesses for sale?
I worked my way through college at the autoshop and bought it when the owner retired. One was from working with a business broker. The other was business for sale by owner .com or something of the sort. It’s relatively complicated and you have to have a decent amount of capital. I was only interested in businesses that came with real estate worth enough that it could secure the loan so I didn’t have to leverage personal assets outside of the down payment.
I highly recommend buying businesses that you know something about. I don’t know anything about construction so I’m entirely dependent on my hiring skills and the people I hire to lead it. When I help them out, I follow the instructions of the crew lead and project manager. Similar with shrink wrapping but fortunately the son of the former owner runs that one for me. I don’t do much with this one as it’s the smallest and some of the work requires security clearance, which I don’t have.
It’s not passive income but it is good income. The best owners look like employees and the best employees look like owners. When I was a W2 in corporate, I wasn’t a good owner. Much better now. Just being visible and jumping on one job a week has improved things so much. Yesterday, I did a warranty job so a tech doesn’t have to. Today, I’m on the way to a job site to help frame part of a basement. Neither takes me more than a couple of hours but it really has a good impact on the teams.
That is awesome. And wise to use the real estate to secure the loan. Any advice for a high w2 earner who wants to buy a business but is stuck on the finding a good business to buy stage?
Not really as it’s really specific to what you want to do. Main thing I would say is to not force it. If you see red, walk away. Don’t just assume that you can do better, maybe you can. But, if it’s a sinking ship and you’re not planning to work that company full time, you’re not going to be able to turn it around.
If you are a Qualified purchaser there are strategies available to offset ordinary income.
This actually directly answers the thread appropriately . If you are a qualified Purchaser ($5M in investments) there are significant tax advantages you use to offset ordinary income.
Yeah, the one actually correct answer here is getting ignored. No follow-up questions, nothing. I see this all the time on Reddit — solid answers get buried while something dumb racks up hundreds of upvotes.
I think it may because there is a small overlap in people who have primarily or solely W2 income and also $5M in investments. But yes. The question was can you do anything, I said, no, not really, but this is the correct answer here.
It’s almost like Reddit is a terrible place to get financial advice
Yep there definitely can be. For a QP with a high W2 there are absolutely ways to reduce ordinary income without owning a business.
401(k)/403(b) max and catch-up, HSA, dependent care FSA, limited FSA (dental/vision), mortgage interest, SALT cap deduction, charitable giving/DAF, deduction bunching, backdoor Roth, mega backdoor Roth, student loan interest (if eligible), Lifetime Learning Credit, child and dependent credits, solar/EV/home energy credits (IRA/IIJA), tax-loss harvesting, capital loss carryforwards, qualified opportunity zones, commuter benefits, 457(b)/nonqualified deferred comp, income and bonus timing, AMT credits, prior-year minimum tax credit, safe harbor estimated payments (110% prior-year AGI), W-4 withholding safe harbor, accountable plans (if employer offers), adoption credit, foreign tax credit, disaster loss relief, casualty loss deductions, qualified business income deduction via side income, net operating loss carryforwards, wash-sale avoidance planning, charitable remainder trusts, qualified small business stock exclusion (QSBS), NUA on employer stock, installment sale treatment, like-kind exchange deferrals (real estate), cost segregation and bonus depreciation, Section 179 expensing, R&D credit passthrough, excess FSA carryovers, and premium tax credit reconciliation just to name a few.
There are many many more I’m too lazy to list
this person's comment is dramatically under appreciated.
Most of these phase out or don’t make a dent for high earners.
Source: I am one.
Yeah but most of these won’t apply to high w-2 earners, who are only w-2 earners…
Roth won’t save them on taxes.
They’ll be phased out if any student loan deduction. Same with child tax credits. And the premium tax credit…
If they are only w-2 earners, none of the business stuff will work.
And only if they’re not trading stock or have kids or have real estate or have stock options or give to charity or volunteer or gamble or go out and talk about work or commute or save for retirement or own a car or do anything except just W2 only. However most people do actually do stuff.
Gambling isn’t going to help them save on taxes
Neither is donating extra money to taxes. It’s a net loss.
Yes it can. If they had big gambling wins early in the year, gambling more and losing that much later in the year can absolutely save them in taxes.
You have to remember that people live lives and do things every single day.
gambling losses are only deductible up to the amount of winnings and you must itemize. beginning in 2026, only 90% of your losses are deductible against winnings.
also, some states don't follow this rule. gambling losses are not deductible in connecticut.
You forgot this can even include lottery winnings in most states.
So yes in many states gambling can reduce your taxes by offsetting lottery winnings
backdoor roth is not a tax deduction, so idk wtf this comment is solving.
If you make over $500k and don’t have any side business none of this really matters at all.
Even the SALT deduction recently passed is phased out.
And only if they’re not owning stock or have kids or have real estate or have stock options or give to charity or volunteer or gamble or go out and talk about work or commute or save for retirement or own a car or do anything except just W2 only. However most people do some of these things.
No IRA/Roth over 125k, no sense in paying 37% income tax on a Roth conversion, nobody has ever saved money by donating to charity and getting some back on taxes.
None of this saves someone with a combined income over 600k a single cent.
Wrong. Mega backdoor Roth IRA grows tax free rather than paying taxes on growth in other accounts.
This is a very big tax advantage.
Please look into it if you are making over $600k. You will thank me.
Very nice list. I’ll add Defined Benefit Plans (IRC 414), which allow for up to $280K per year to be put into a retirement account which reduces taxable income. When combined with a 401k and profit sharing, an employee can have more than $300K of income pushed into a retirement accounts reducing their taxable income.
Does R&D credit benefit individuals?
Yes if you have received qualified restricted voting shares in that w2 company or create a partnership
You can't have an HSA and an FSA.
You can definitely have one. Never said you could have both.
There are many either/or options displayed here.
If I can help save one person a single dollar in taxes then my goals are met.
You can have an HSA and a Limited Purpose FSA. The LPFSA can only be used for dental and vision expenses. At least, that's how it works at my employer.
Max out your 401k, HSA (if offered), Backdoor 401k (if offered). Outside of that, either business ownership or rental real estate are the only other ways to offset taxes.
Backdoor is post tax, not pre tax. It won't lower your tax bill
But it’ll give you tax protected growth.
OP's question was how to reduce w-2 income, not how to obtain tax free growth of investments
Rental real estate is considered passive. So no active income deduction.
This the the reason why so many spouses of high earners are real estate agents
Do not need to be a real estate agent to be considered a real estate professional.
No but it is the easiest way to document and establish it, hence why so many people do it.
But don't you actually need to make money doing it? If your spouse has two years of only losses to go against the other spouses W-2 income, wouldn't that trick stop working?
People just deduct whatever and find out the oopsies later on when audit comes
If it’s a STR, you get to do bonus depreciation. Yummy!
Damn. This is crazy.
Short term rentals can count as active. I'm planning on buying one in 2026 to utilize the STR Tax Loophole
Considering this too especially if home values slump.
I just spoke with a CPA about this. She told me to qualify as a an active real estate professional, you have to derive more than half your income from real estate activities. Among other requirements. Now I’m not a CPA, but AI backs up the professional tax person. Yet I continue to hear a lot of people talk about how one can offset regular income with STR.
You can leverage real estate many ways to salvage taxes
Passive activity losses are recaptured and offset anything, even ordinary income, when disposed with no tax/at risk basis limitation. PALs are considered in aggregate until disposed, in which case that activity’s cumulative losses free up. It can offset anything other than gambling income. This also counts if you were to, say, invest a few thousand in a number of real estate partnerships. Typically structured as LLCs for good reason in my experience.
A few schools of thought, but typically why I see most from the investor-side (owner/entity side changes a bit if you’re interested in going that route) is they invest a decent chunk of capital up front. Let’s say 50k for this example. To keep it simple I won’t get into specific financing rolling into your basis, but structured as a partnership, certain loans do roll into your basis (like QNR financing in the case of real property) which can mean tax-free withdrawal over your investment.
This is very broad, this is an incredibly intricate space even for tax. Consult a tax advisor who is WELL-VERSED in real estate to properly apply it to your situation. This is not advice, merely an overview.
But back to my example. 50k invested. First few years, small withdrawals, maybe some income, maybe some losses, the initial draws against capital are tax-free returns of capital so long as you clear tax and at risk basis. You want to make sure tax basis is fine, exceed that and losses are lost and distributions in excess should result in capital gains. Any loss carryovers are lost on disposal. This is exhibit A of needing a good real estate tax advisor. At-risk is a little more taxpayer friendly. Losses in excess of at-risk basis that get carried over can offset gains from the sale your interest. Still, very complex and requires a competent real estate tax accountant.
Now we get into the fun of passive activity. These are aggregated at the individual level, whereas tax and at risk are handled by the investment. This is what makes real estate so taxpayer friendly at the HNW level. If you have 50k invested in 50 different partnerships, some make money, some don’t, they offset each other as far as taxability. Distributions, as long as you clear basis hurdles, are tax-free. Losses that clear tax and at-risk but get hung up at the PAL level carry over. In disposal, if not used up offsetting other passive income, the losses from that investment free up and can offset almost anything.
There’s also EBL, but that’s the 4th hurdle and beyond the scope of this already way too long comment. Consult a good real estate tax accountant to discuss your specific situation.
Source: Senior tax accountant in real estate. Some of my clients have 8 figure W-2s before getting into the investing side. I didn’t know you could get a w-2 that large until I started doing this professionally and learned, but it makes sense knowing what I know now.
Not always - if you “substantially participate” in the management of a rental, you can treat it as active income in lieu of passive. That also pulls in the depreciation offset.
What does “substantially participate” I own two rentals properties I manage them.
That would be active management. They just don’t want someone that owns 250 units and farms it out to a management company to claim they’re “actively managing” their rentals
Are you sure? I think there is still some hourly requirement depending on which status you want to qualify for.
If you’re the only one managing them, what does it matter how many hours a week it takes? “Substantially participate” means you do a large portion of the required work. If you’re doing all the work, you’re doing a hell of a lot more than a large portion of it.
Key word is “STR” though. If the above commenter has 2 long term rentals he would still be considered passive.
Short Term rentals allow full depretiation expense to be taken in the first year, allowing you to pretty much take a huge loss that can offset your w2 income in the current year, and carry forward any remaining loss to future w2 income. All under the current tax law, certain conditions need to be met
dont you still have depreciation recapture at ordinary tax rates when you sell later? and by then you're probably in an even higher tax bracket
Not if it's short term rental and you're involved more than 50% of the time. Then everything is a write as a pass thru to your w2 income. Only need to show income 1 year out of 3 then the rest can be losses.
This can have a negative effect though on your ability for new loans.
Hehe..look harder.
Incorrect, look up the short term rental loophole with W2 income.
Depending on you w2 time commitments or if you’re married your spouse is able to, one of you could be a real estate professional intake upfront deductions on your portfolio
Thinking about short tern rentals to use depreciation to offset w2 taxes. Depends on where I end up moving next for work before pulling the trigger.
You do have to dedicate x amount of hours to put yourself in this category to use the tax benefits. Document everything .
LPFSA as well, if you have vision or dental expenses to make it worthwhile. 529 accounts if you have higher education expenses for yourself or if saving for kids. If your state has a decent plan you can join it and then you don’t pay state taxes on the contributions and earnings are tax free at both state and federal level if used for qualifying expenses. DCFSA is tax free too, if you have childcare expenses, which can include bougie summer camps for older kids, or before/aftercare. Not just daycare for wee tots. These are all just minor ways to stop the bleeding but they add up.
How does rental real estate estate help offset taxes ? Isn’t that just more income
Not if your expenses are greater than income, net loss.
I mean sure but that can’t always be the case or it doesn’t sound like a very successful rental portfolio ?
On paper ;-)
you can’t deduct losses on a rental property as a high earner - which I leaned the hard way
Short term rental depreciation. https://www.reihub.net/resources/short-term-rental-tax-loophole/
Look up “bonus depreciation” for short term rentals.
You can't. W2 workers are funding this country because they can't cheat on their taxes like business owners can.
God damn this is so correct it hurts…
Business owners are taxed twice are they not?
The regular business tax ~15% plus whatever salary you draw
Only C-corps, which is rare for small businesses. Most are S-corps, or LLCs, which are taxed at most once.
Is that right? I have a LLC and I'm taxed twice
Look at pass through LLCs. There are different kinds of taxation, some are taxed as C corps, but there is not much advantage to that.
Is it cheating if its legal? Some people are just better at learning tax code and utilizing what they learned.
I would say there is a lot of gray area. Deducting vacations and personal dinners as travel expenses… that kind of thing that us w2 workers can’t.
Problem is if the IRS catches wind or does an audit, they will end up owing more than just the tax.
So you think small businesses owners pay all the tax they should? I know a lot of small businesses owners - not one is paying all the taxes they should. Not one has ever been audited.
Congratulations, you know .0001% of small business owners lol
I know more. And it shouldn’t be .0001% since it’s a common conversation
Business owners write the code, then benefit from it. So yes, it’s cheating.
Also the poors cant lobby effectively for anything like the breaks businesses get.
W-2s absolutely carry the torch.
You can offer 100% match on 401k to your sole employee, and get it yourself. Allowing limits to be doubled.
Let’s say that as a small business owner, you buy something from someone. Which almost all of them do.
Travel to the factory area? Expensed. Travel to a conference tangentially related to your business? Expensed. Travel to a place where you take one meeting to lease space, potentially buy something, etc.? Expensed.
Do you own anything food related? Research dinners are now expensed. Anything design related — even if it’s just for ‘testing’ a couch in an office space? Expensed and depreciated.
Monthly parking for a vehicle you use 80% for business? Expensed. As are the miles you drive for business. At 60c+ per mile, and proving it wasn’t for business is nearly impossible.
And bringing family? Maybe you can’t pay for their plane tickets, but once the hotel is paid for, etc., what else is there to cover? Who says you can’t have two entrees and a bottle of wine to yourself?
And all of that business credit card rebate money at 2%? It doesn’t count as income, per the IRS. So you’re now able to expense interest on the loans and credit lines, but also able to get 2% on all CC spend tax free.
The list goes on. No fraud necessary.
It’s a small club, and you’re likely not in it.
It is a structural imbalance when the tax code so heavily favors them.
It’s not being “better at the tax code” when it’s business owners that literally wrote it so that they could benefit from it. That’s like saying lawyers are “better at representing people in court” when they’re the only ones allowed to do it and they gate-keep the profession.
Those people either write the tax code themselves or pay people to do it for them. It’s legal because they can change the law to suit them unlike the rest of us.
Yes
Using infrastructure without paying for it while making others pay for it is cheating. So yes, it’s cheating.
Welcome to being a tax slave.
I practice starvation on a regular basis,, so far it's working out pretty good
The system rewards capital and ownership and taxes the fuck out of labor.
The only real way is short term rental aka Airbnb. But you always need to be buying and hustling in order to save some taxes. It’s truly nuts how much w2 employees pay.
This, but it's so much more work and you have to buy an AirBnB at sky high prices while current owners are trying to offload their places. Nice big sweaty cheese in a mouse trap if you ask me.
Yeah prices these days don’t guarantee you any profit at all. You’ll have to operate at a loss just so you can make your money back on the depreciation. Then you try to sell the property and then they rape you on the cap gain tax at full price. It’s a cycle where you probably didn’t save any money in the long run but it came with massive headache either way. Only worth it to do if you can truly figure a way to run the Airbnb effectively.
There's almost no way to meaningfully and legally write it off, lol.
Don’t worry about it, enjoy your wealth and the high quality of life it affords you.
Have considered buying a giant house just for the deduction. But we are above the SALT cap, so it’s less lucrative.
I have some rental real estate from before I got married. It continues to generate positive cash flow and tax losses. But it’s negligible in the grand scheme.
So in short I am not ATM. Two w2 high earners,
Yea, if your writing off capex you spent money on a business that you didn’t take as income. Completely different concept entirely
Max pre tax, 401k, HSA or FSA, IRA… there’s not much really there…HSA is Tripple tax advantaged and you’re gonna use the money at some point for medical bills.
Open a daycare in Minnesota?
You have to open a business, make huge investments during first couple of years, actively participate, write off massive losses off your W2 income, and hope to turn it into profitable business by year 3 :)
I just started an llc. Im hoping its profitable 2026 but I haven’t really been able to write anything off this year. You have deduct the losses from the businesses income not your W2 or Id dump way more money into it.
“You have deduct the losses from the business not your W2….” Not true! A legitimate business loss reported on Schedule C can be used to offset your W-2 income, thus reducing your total taxable income.
I shouldn’t use the word lost. Investment is not deductible. Ive bought inventory, packaging, and web design. Idk how to turn any of those into a loss without fraud.
Talk to your CPA, I’m pretty sure business loss can offset W2 income so long as you actively participate in that business.
A friend if mine is a CPA so I’ve just been running off her free advice. I cant write off the purchase of inventory. If I sold it I could deduct a bunch of expenses from the profit but that opens a door with the IRS that’s worse than me than waiting. There is a $5k startup credit I can deduct for expenses like web design, home office, packaging etc. The bulk of my expenses was inventory which is not deductible.
They aren’t.
Income is for peasants, nowhere to hide W-2 income, you need assets and unrealized capital gains as the main source of your wealth growth if you want to keep the IRS away.
I live in suburban NY - high SALT helps
I don't really think paying more in taxes helps to pay less in taxes.
If you’re a really high earner the SALT cap goes back to $10k
It’s the circle of life…
The OBBB is full of shit. All it lets you do is if you are a business owner, you can take the depreciation in year 1 versus over 5 years. I run my business to make money first and save taxes second.
Not much you can do to offset your taxes as a W2 earner. Need to start a business
As a w-2 there’s not a lot of options. But if you’re willing to do a little consulting on the side, or start a small side gig you can expense a hell of a lot to a part time business.
Start a small business, something like reselling on eBay. Claim a home office. Write off mileage, inventory, things like that.
Deferred comp plan if your company has it for your level. MBDR is also good for offsetting future tax obligations.
The only things that help are 401k, having kids, having interest on a mortgage, or a short term rental with accelerated depreciation( in some states)
Having kids is way worse than taxes.
Donations to qualified entities, save them receipts. Doesn’t have to be $$ to benefit from donating items with utility and/or value.
Who determines the value for donations?
When I’ve used them at filing, it’s always been more of a “honor system“ accounting. Once it reaches a particular threshold assigned by each state, say $3000 or $5K, etc, you may be required to provide an appraised value, but none of my individual donations have exceeded the threshold.
I’ve always been provided a receipt when I ask, and I populate the value.
Got married
No way to get shelter, w2 sucks
Make sure you’re maxing out your SALT deductions if that’s an option to take advantage of the new 40K limit. Pre pay your property tax bill if that’s an option to increase SALT up to 40K (but don’t overshoot too much as over 40K does you no good on federal. Maybe state would benefit). Keep in mind next year you won’t have so much flexibility if you prepay this year.
I max out my HSA and have a pretax deduction for my employee parking. I max out the 401K and add additional to an IRA and a DCP. I do give to charity and with my other deductions like taxes and interest, I am able to itemize. These aren’t too complex. I had a rental for a while but it was more hassle than it was worth. This year, I also made a lot in the market and my trades are taxed like ordinary income so I made an extra tax payment so I am not significantly short.
Oil and gas investments, short term rental investments, maximum charitable donations, max out pre tax 401k, HSA, and if your state program allows the 529 deduction.
But the real answer is own a business.
Does your employer offer/do you qualify for Deferred Compensation? I squirrel away quite a bit into my DCP. It’s set for a fifteen year annuity upon separation from my employer.
I have a side business selling 3d printed objects. I have income from sales, lots of expenses, and for most of the year worked on "product development" for a couple ideas which haven't quite found a commercial market (yet) and needed a lot of design iterations.
This works for me, because I'm generating some income, and that establishes a base of legitimacy that covers my attempts to make new prints and products that might not be selling.
Open a “small business”.
I personally started a business. It's so far just a money pit (which isn't the goal of any business and not the goal of mine) but the write off is nice.
TURO business - 100% Bonus depreciation on the cost of the car, make a little money on the side with the business but it’s mainly and easy business to set up and use as a tax write off path. I use a management company to manage the vehicles.
Bought a house 2 years ago and the mortgage interest write off is massive. Before that, standard deduction and maxing my 401k was the best I could do.
If you have a hobby of some sort that you have turned into a business that you can claim a loss on a schedule C that will offset your total owed however, you can’t do that for very long because the IRS will look and see why is this never turning a profit? They will ask you to explain how it is not just a hobby.
Mortgage interest and 401k contributions
In Rome it was a badge of honor to be able to own property and pay taxes as a citizen.
Calculate your deductions and pay whatever extra so you don't have any surprises. There really isn't much as a W2 earner that makes any sense to buy to try and offset.
Most tax deductions just decrease your taxable income anyways. Dave Ramsey has a good bit from a farmer he met as a youth "son why would I spend a dollar to get a quarter back? "
You don’t. There’s only so many ways for W2s to offset. They are the ones that pay a tremendous amount of the taxes in the US. The super rich aren’t W2 and can avoid; the middle class and poorer are supported by a progressive tax system. The too 10-20% band that is heavy W2 can only mitigate taxes so much.
I like to donate to causes I believe in anyway so I always make sure to donate appreciated stock instead of cash.
Oil investments provide fairly reliable cash flow and huge up front deduction from W2 income income.
How do you feel about oil wells?
Section 179 rules.
/r/henryfinance
Invest in oil and gas wells before drilling commences.
401k lowers my taxable by 23k and at 24% federally and 8% state that’s a savings of nearly 8k between the two
By earning more money to pay the taxes I make on my regular 40
I’m sure, my spouse and I could be doing more but this is what we take advantage of:
Max out HSA & Dependent Care FSA (daycare for kids) Charitable Donations 401k contributions pre tax
This is the only real thing to do:
https://www.airdna.co/blog/short-term-rental-tax-loophole
Get rental.properties and write off everything.
Start a “consulting business” - write off everything you can.
Buy rental property.
Might need a financial advisor at this point. There are tax strategies that are sophisticated and time-consuming which they can run for you without you needing to try to navigate the complications of financial devices on top of your daily workload. Not to mention that there are options like annuity planning, which can offer some much needed tax deferral for long-term growth, which require licensure. Seek out a fee-based-only fiduciary with a strong reputation in your area.
Bbb gave me extra $40k deduction. Flex health and dependent, child credit, mortgage, 4 tax deferred investment acct. prob paying abt 20% on $400k hhi
Be patriotic. Pay taxes.
Yeah, unfortunately most of the code really does favor owners over pure W-2s. One of the only legit ways W-2 folks move the needle is the STR + cost seg + bonus depreciation route, if you actually meet material participation (and REPS if applicable). That’s why people obsess over tracking hours—without clean logs it falls apart fast in an audit. Stuff like REPSShield just makes that part less painful, not magical.
Pretax 401k / traditional Ira contributions, has contributions, 1k charity next year — above the line deductions
Below the line deductions depend if you itemize or not. If you itemize there are lots of options
all of you folks promoting business as tax reducers are ignorant. solo entrepreneur or s-corp taxes flow to owners personal tax return. full c-corp sheltered but then incurs 20%+ corporate tax before distributions. And 99% of small to med business owners are solo or s-corp. C-corp comes with major costs that most small to med businesses cannot afford
Marry a realtor and run a short term rental biz
Must have a side business and wife gets a realtor license
What about tax loss harvesting via direct indexing? It’s a newer thing and mostly works to offset capital gains but believe it can lead to a deducation of ordinary income by up to 3k
I used to take off non reimbursed biz expenses but cant any longer. I would deduct 50-60k easy.
Now just max out 401k. Cartilage gifts, mortgage interests, car registration, any car loan interest, property taxes. Interviewing/job search expenses can add up if you paid to interview out of state.
Bought a bunch of bitcoin miners. And when I had real estate used every angle there too
Simple word: EXEMPT
With a farm...
There are hedge-fund-style strategies designed primarily for tax efficiency, generate losses that pass through on the K1. AQR has the most popular one but it’s 1 mill minimum investment.
Volunteer work, in my state at least, they don’t put a number on the tax receipt. I don’t volunteer or donate for the offset but I’ve noticed it helps me
Business ownership alone doesn’t offset w-2 income like people are saying here. Unless you are doing something totally illegal like I know some people do. Incurring a loss on a fake or even a legitimate business doesn’t affect your tax obligation on a w-2 income.
God forbid you contribute to public services
You're free to contribute if you wish.
If we rely purely on charity, society would crumble
It's crumbling anyway.
Yea because we started taxing people less. American society was at its pinnacle when the top marginal tax rates were at 90%