How to think about your income taxes

What are the concepts that influence how we understand taxes? We'd love to explore concepts that are very important in how we think about taxes, so we make sure we're seeing things from the same perspective and are in sync with the approach to saving money on income taxes.

To begin with, why are we doing this? Why not just pay the taxes, and just let the system do its work?

Alright folks, gather 'round because we've got a doozy of a problem here.

Picture this: The system is like a leaky boat, and guess who's lounging on the deck with a cocktail while the rest of us are bailing water?

Yep, the super-rich.

These folks are slipping through tax loopholes like they're in an Olympic limbo contest, thanks to their army of high-priced lawyers, accountants, and financial wizards.

Meanwhile, the rest of us are left holding the bag—and it's not a designer one.

This whole setup is more lopsided than a three-legged table, and frankly, it's about as fair as a rigged carnival game.

Time to fix this mess, pronto!

Imagine a universe where everyone can wrangle their finances like a rodeo cowboy on a wild bull!

That's the dream fueling our mission—to bulldoze barriers and sprinkle this crucial wisdom like confetti at a parade. We're your trusty sidekicks, armed with the gadgets you need to make savvy decisions and strut down your financial path with swagger and pizzazz!

So, now let's dive into some of the concepts that are very important in how we think about taxes.

1. Effective tax rate

The effective tax rate is the total amount of taxes you pay divided by your total income, and that is what we call the effective tax rate. This is important because everything we do is helping you lower your effective tax rate. This is not a number you'll find in your tax return, but if you can't calculate it yourself, we can help you calculate your effective tax rate. We will send a portal invitation, where you can upload your previous year's tax returns and see your effective tax rate as well as see how your effective tax rate compares to other people in your tax bracket.

2. Lifetime tax rate

Even though a lot of our focus is on optimizing paying less taxes this year, the biggest goal is lowering the taxes you pay over the course of your life. So sometimes we will be making these trade-offs that entail slightly more taxes this year, but substantially less in taxes over the course of your lifetime.

An example would be this idea of contributing to a Roth account now, which means post-tax money today, but then you never pay taxes in retirement. So again, the lifetime tax rate is what is most important here.

3. Idea of return on hassle.

There's a lot of strategies we actually don't cover because, in our opinion, they're painful, take a lot of time, and the return is not that big. We're not optimizing every single dollar of taxes here. What we're optimizing is what is worth the time, effort, and energy. What is worth the hassle to make it all worth it?

Fourth concept, and this is the most important lesson here, is don't let the tax tail wag the dog.

Tax is a part of life. We'll think of tax strategy because it's important, but tax strategy does not come first.

First, live your life the way you want to, and then figure out taxes. A great example of letting the tax tail wag the dog, a.k.a. what not to do, is when people move to a city or state they actually don't want to live in to save money on taxes.

Recap

How to wrap your brain around taxes without it exploding?

• First, there's your effective tax rate

• Second, we're playing the long game here, folks—your lifetime tax rate is the real MVP.

• Third, always consider the return on hassle. Is this tax-saving scheme worth the extra gray hairs, sleepless nights, and possibly a few therapy sessions?

• And fourth, for the love of all that is holy, don't let the tax tail wag the dog. Keep your priorities straight, people!

About Taxagon and How We Can Help

We’ve built a community to give everyone access to the tax and wealth building tools typically reserved for wealthy individuals with a team of accountants and lawyers. We make it simple and seamless for our customers to take advantage of these hard-to-access tax-advantaged structures so you can build your wealth more efficiently at less than half the cost of competitors. From picking the best strategy to taking care of all the setup and ongoing overhead, we make things simple. The results are real: We and our partners have helped create more than $1.1 billion in additional wealth for our customers.

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1  The material in this email does not provide tax, legal, investment, or accounting advice. This is not an offer to buy or sell any security or to participate in any investment strategy. The strategies and/or investments discussed in this material may not be suitable for all investors. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.