In our progressive tax system, high-income earners typically pay a greater percentage of their income in taxes. In addition, high-income earners are also subject to different tax rules than middle- and lower-income payers, which can translate into even higher taxes. In many cases, high-income earners can be surprised by a staggeringly high tax bill at the end of the year. At James T. Borello & Co., our consultants are familiar with the unique challenges facing high-income earners and strategies taxpayers can use to minimize tax liability.
Alternative Minimum Tax
One of the most significant tax challenges of high-income earners is the Alternative Minimum Tax (AMT). This tax system was created in 1970 to target a small number of upper-income taxpayers who paid no taxes because of numerous tax breaks. However the AMT now effects millions of taxpayers. Understanding the rules that govern the AMT can be tricky and it’s best to consult a knowledgeable tax professional to make sure you are taking advantage of all available tax breaks and exemptions.
Phased Out Deductions
High-income earners also have another tax challenge in the form of phased out deductions. Itemized deductions are gradually reduced for high-income earners as their income increases. These include mortgage interest and property tax deductions and deductions for charitable contributions. The benefit of credits and exemptions is also reduced as income rises.
At James T. Borello & Co., we walk our clients through all of the tax challenges high-income earners face and help develop a tax and investment strategy to maximize wealth. In many cases our clients can benefit from different retirement planning vehicles that offer tax savings as a way to mitigate some of the disadvantages of the progressive tax system. Contact us to learn how our consultants can help you navigate tax preparation as a high-income earner.