Cohosts Bo Hanson and Brian Preston helm “The Money Guy Show,” a brand which has grown to become something of a media empire — and a resource for those looking to grow (and save) wealth.
In an episode on YouTube tackling the tricky topic of legal tax avoidance, Hanson and Preston broke down their best pieces of advice for those of all ages and all walks of life, when it comes to “beating” the IRS fair and square. Find out what they said below.
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Beating the IRS in Your 20s
The first tip issued by “The Money Guy” hosts? Don’t overcomplicate it and take the standard deduction. The standard deduction can be a handy tool, keeping things simple (Tax Policy stats cited by Preston from 2022 indicated 91% of filers took this option).
“For most young people, it’s gonna be hard to get over the standard [deduction] thresholds,” Hanson added.
Next up for the younger set? Make sure you’re getting your employer match. It’s free money, essentially, and your contributions produce tax advantages as well. Finally, with so much time ahead to allow for your money to grow, Hanson and Preston suggested you prioritize your tax-free accounts — your Roth IRA, Roth 401(k) and HSA.
“Seeing [decades] of compounding growth tax-free? Super exciting,” Preston said.
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Tax Tips for Those in Their 30s
For those in their 30s, the centrality of the “three tax bucket” strategy was made plain. The three buckets — the tax-free (as above), the tax-deferred (traditional 401(k) plans, 403(b) and IRA) and the after-tax (brokerage accounts) — allow for a retirement plan which sees much higher tax-free and favorably taxed withdrawals. Doing so means less absolute reliance on early traditional 401(k) investment.
Given that this is the period of life when many people opt to start a family by having kids, the show’s hosts further underscored the importance of leveraging child-related tax breaks.
The child tax credit (CTC) was the big one brought forth, but the dependent care flexible spending account (DCFSA) and child and dependent care credit were also major tax moves being underutilized by many in this age bracket.
The Tax ‘Fork in the Road’ in Your 40s
If the previous two age brackets were ideally focused on intentionality and simplicity, those in their 40s should look forward to “doing the hard work,” Hanson said.
The major theme here? “Max out,” the hosts explained. These are your peak earning years and maxing out your tax-advantaged accounts is key.
A strategic conversion of some assets into Roth accounts was mentioned in certain tax situations, as was the opportunity to leverage tax-loss harvesting to redeploy those dollars into new, similar, investments (with a tax benefit that can be carried on).
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This article originally appeared on GOBankingRates.com: Top Tax Tips To (Legally) Beat the IRS by Age, According to ‘The Money Guy Show’
