Optimising fixed-income returns: How to get around high tax (2024)

FAQs

How can high income earners reduce taxes? ›

Many everyday expenses can be itemized as deductions on your income tax return. Categorize your expenses into IRS-approved deduction categories such as medical and dental expenses, deductible taxes, home mortgage points, etc. Bunch your expenses into one tax year to maximize the value of your deductions.

The anchor portion of your portfolio uses investments that offer a fixed return, such as certificates of deposit (CDs) or single-premium deferred annuities (SPDAs). These assets have a set lifespan, and the amount you invest is designed to grow back with interest to your original principal.

Explain to students that sales taxes are considered regressive because they take a larger percentage of income from low-income taxpayers than from high-income taxpayers. To make such taxes less regressive, many states exempt basic necessities such as food from the sales tax.

One way you might avoid owing taxes on the bond interest is to cash your EE or I bonds before maturity and use the proceeds to pay for college. If you meet this set of rules, the interest won't be taxable: You must have acquired the bonds after 1989 when you were at least age 24. The bonds must be in your name only.

Municipal Bonds

This means interest on these bonds are excluded from gross income for federal tax purposes. In addition, interest on the bonds is exempt from State of California personal income taxes.

Income from bonds issued by state, city, and local governments (municipal bonds, or munis) is generally free from federal taxes. * You will, however, have to report this income when filing your taxes. Municipal bond income is also usually free from state tax in the state where the bond was issued.

The retirement saver's tax credit is one of the most frequently overlooked tax breaks, and it can be worth up to $1,000 for single filers and $2,000 for married couples filing jointly.

What is the average tax return for a single person making $60000? ›

If you make $60,000 a year living in the region of California, USA, you will be taxed $13,653. That means that your net pay will be $46,347 per year, or $3,862 per month.

Filing as Head of Household can result in a higher Standard Deduction and more favorable tax brackets than filing as Single, if you qualify.

If the interest rate on your debt is 6% or greater, you should generally pay down debt before investing additional dollars toward retirement. This guideline assumes that you've already put away some emergency savings, you've fully captured any employer match, and you've paid off any credit card debt.

FDRXX – Fidelity Government Cash Reserves

For all intents and purposes, it is basically an older version of SPAXX. Their holdings are nearly identical and they have nearly the same yield and the same historical returns. FDRXX launched in 1979 and has a 7-day SEC yield of 5.02%.

SPAXX is available in Non-Retirement Brokerage Accounts (other than Fidelity Cash Management Accounts) and Retirement Accounts, such as IRAs. FDRXX is available in Retirement Accounts. While these funds have some similar characteristics, there are differences in their asset composition and underlying structure.

A regressive tax is a fixed amount of money paid by each individual or household. In a regressive tax, the percentage rate decreases as the amount being taxed increases.

High marginal tax rates, the amount of additional tax paid for every additional dollar earned as income, reduce individual incentives to work and business incentives to invest. That means individual income taxes also have a negative effect on the economy.

Different income tax brackets apply depending on how much money you make. Generally speaking, a higher percentage is typically taken out of your paycheck if you earn a higher level of income.

Contributions to a Roth IRA aren't deductible (and you don't report the contributions on your tax return), but qualified distributions or distributions that are a return of contributions aren't subject to tax. To be a Roth IRA, the account or annuity must be designated as a Roth IRA when it's set up.