Hello, everybody. It's Sam from Financial Samurai. And it is almost the new year, which means we should conduct some money-saving tax moves to save some money and grow our wealth. Taxes are our largest ongoing liability, right? Death and taxes, you can't avoid them. But we can get smart about our taxes, and we can make moves to lower our tax liability.

The great thing about having multiple income streams, as I'm sure all of you guys have, is that-- you know what? We don't rely on one single income to survive. But the bad news about having multiple income streams is that we have to do more tax work come year end and into the new year.

So let's talk about some various tax moves we can make. Number one, and most obvious, is charitable donations. Everybody should be feeling more charitable during the holiday season and hopefully all throughout the year. Being able to give your time and money away to worthy causes is one of the best benefits of being financially independent.

You no longer feel conflicted about whether you should save and invest your next dollar versus helping someone in need. You just kind of do it. And being able to spend that time with someone is really, really special. So in terms of charitable givings, keep in mind you'll need to itemize deductions and file Form 1040.

The charity organization must be qualified with the IRS and be actively tax exempt. Used items such as housewares and clothing must be in good condition or better for them to be deductible. So when you're going to Goodwill or the Salvation Army, don't just give them a bag of stuff you wouldn't wear because they're dirty or ripped or broken.

You've got to donate usable items that you would wear or use with pride. Donated vehicles can be deducted at fair market value if you meet certain requirements. For example, the charity must sell your car well below market price to a person in need. If the total of your non-cash contributions is greater than $500, you'll need to file Form 8283, which means you have to highlight the details of that giving.

You'll need a written record of all cash donations with the date, amount, and charity name. If you donate $250 or more in cash or property, you'll need a statement from the charitable organization detailing your gift and so forth. So there are many, many rules. But overall, I don't think the IRS is going to nitpick on what you give and what you write as the value.

Just be as close to the true value as possible. In terms of giving percentages by rate of income, I thought this was really interesting. The average giving percentage as a percentage of total adjustable gross income looks to be around 3%. Now, the lowest giving percentage rate is from the income group who make between 200,000 to 250,000 at 2.4%, while folks making 45,000 to 50,000 give 4%.

And then if you move up the income curve to 10 million or more, these folks give away the most percentage at 5.9% and also the most in absolute dollar terms. It's interesting that the lowest giving income bracket is the 200,000, basically to the $1 million range. I postulate the reason is because between 250,000 to a million, you are paying a crap load of taxes based on your W-2 wage.

The tax system is progressive. Top tax rate is 37%, which is lower than the past at 39.6%. But still, 37%, then you get state income tax, you get FICA tax, and so forth. You're probably not as willing to give because you feel like you're getting screwed over by the tax system versus someone who pays little to no income tax or versus someone who's making millions of dollars a year and paying a lower tax rate because most of the income is from long-term capital gains.

All right, besides charitable giving, we can all capitalize losses on bad investments. So if you own securities or property that have been declining and you're below your cost base, consider liquidating before year end if you don't anticipate a recovery. So under the tax code, an individual may deduct up to 25,000 of real estate losses per year, as long as your adjusted gross income is under 100,000 or less, and if you, quote, "actively participate in managing the property." Deduction phase out is when your income approaches 150,000.

So over 150,000 in income, you're not eligible for these deductions. In terms of stock investment losses, you're still only allowed to deduct 3,000 a year in capital loss deductions. That said, you can just keep on deducting that 3,000 a year every year until it is exhausted. So another good tax move is to defer income and itemize deductions.

So it all depends on how much you plan to make the following year. You won't know for sure, but it's good to guesstimate. So here are some individual tax moves. One, you can make additional contributions to your 401(k) before year end if you haven't maxed them out. Two, if you're not subject to AMT, you can also consider paying property tax installments and state taxes in the current year that aren't due until next year.

Accelerating these payments may help you benefit every other year and lower your tax burden for the current taxable year, but you've got to do the calculations based on the new SALT tax deduction limit of 10,000 and the standard deduction limit of 12,000 a person. They're always changing, folks, so you've got to stay on top of this.

Three, you can also try asking your employer if they can pay you your year end bonus in the following year if you want to defer income. Back when I was working in finance, we had the option to defer our entire year end bonus until some later date by one to three years.

And I never took that option because, well, I don't know. Sometimes I am afraid that the company will just go bankrupt or not pay me, and that's something you have to consider as well. And then finally, you can consider reinvesting some of your investment proceeds into opportunity zone funds, which may end up being tax free if you hold for the required period of time.

I think that period of time is 10 years, so that's a long time to tie up your capital. But after 10 years, and if you make some money and you don't have to pay taxes, that can be a huge win. On the business side of things, if you have a business which is cash based, not accrual based, you can defer taxable income to the following year by sending December invoices at the very end of the month.

The reason this can work is the business won't receive payment for those invoices until January or later, and the business's taxable income isn't captured until the date the cash comes in, right? Just got to follow the money, the cash. So for me, what I'm doing is I have some checks that I received in December for stuff that I did in November, and I'm not going to deposit them in December if I already have a great year.

I'm going to just wait until January 2nd or whenever the bank's open to deposit those checks. Companies and sole proprietors can also reduce taxable income in the current year by charging business related expenses in the fourth quarter that they normally take in the first quarter of the following year.

So if you expect your business to grow rapidly in the following year, then wait until the following year to load up on capital expenditure. In terms of business expenses, if your business needs a vehicle and is also having a great year, consider buying a 6,000 plus SUV or truck by December 31st, because you can deduct basically all of the expense.

So let's say you buy a $70,000 Range Rover Sport and use it 100% for business. Tax law allows you to deduct 70,000 or a lesser amount if you would like. In this case, you'd use section 179 for expensing. So you can amortize that expense over a longer period of time.

If the gross vehicle weight is 6,000 pounds or less, your first year write off is limited to 10,000. But if you have a luxury auto, there's this bonus depreciation where you can basically deduct 18,000. But again, check with your tax accountant. Finally, a great private business strategy is to hire a close friend or relative who is in a lower tax bracket than your business tax bracket.

For example, you could hire your high school son for $3,000 to redesign your website, or maybe $3,000 to clean your toilets and mop the floors. If all he's earning is $3,000 for the year, it's going to be tax free. Meanwhile, you reduce your taxable income by 3,000 and hopefully get a slick new website or some clean floors out of his labor.

So this is something that many family businesses do. They hire friends and relatives to do work for them, spread that wealth, and reduce their taxable income. All right, next, you should also review your flex spending account, the FSA. Make sure you don't lose any money in your FSA if you haven't yet spent as much as you anticipated this year.

Check with your employer if your plan is eligible for a rollover of unused funds until March 15 of the following year. If not, you've got to figure something out on how to use that money. Surely there is something bothering you that you probably should check out. And on the other hand, if you've already run out of the funds in your FSA, but have things like medical work or fillings to do at the dentist, try to just postpone them until the next year if they aren't urgent.

If you're planning on leaving corporate America next year, get your physical done this year. It's usually free under preventative care. And also consider going to specialists to treat all specific injuries. Maybe you need an MRI for a bum knee. That's expensive. And you're also going to have to pay a co-pay for that.

Or maybe you should finally see a pulmonologist for your asthma or COPD. Whatever the case may be, use your FSA, use your health care benefits, and don't let them go to waste. Next, consider revising your withholding. Even though you probably submitted your W-4 form to your employer ages ago, you can still file a revised form to make adjustments to the remaining pay periods left in the year and for next year.

So if you anticipate you haven't withheld enough taxes so far this year, you can increase your withholding to help reduce penalties and fees when you file your taxes and also for next year. Also check if you've already paid 100% of your current tax liability this year. If so, and your AGI is less than $150,000, you should be able to avoid being charged a penalty.

But if not, you need to have paid 110% of your current tax liability in the year to avoid getting dinged if your AGI is above $150,000. So this is the safe harbor rule, because the government always wants your money no matter what. For 2020, the federal income tax rates don't change, but let's just review them real quick.

If you make between $0 to $9,875, your taxable income on the federal level is 10%. Now I said that kid, your son, who made $3,000 from your business doesn't pay any taxes. And the reason why is because the standard deduction is $12,000. So if you make between $9,876 to $40,125, the taxable income is 12%.

And then if you make from $40,126 to $85,525, you pay a federal marginal income tax rate of 22%. And then from $85,526 to $163,300, you pay a tax rate of 24%. From $163,301 to $207,350, you pay a 32% tax rate. From $207,351 to $518,400, you pay a 35% tax rate.

And then for any income above $518,400, you pay a 37% federal marginal income tax rate. So I wanted to point out a couple of things. One, notice how the tax rates are 10%, 12%, 22%, 24%. And then it jumps to 32%. So 24% to 32% is an 8% spread, 8% difference.

Therefore, I think the optimal gross adjusted income for an individual is about $163,300. My question to all of you is, do you really want to pay a 32% marginal federal income tax rate on every dollar you make above $163,300? I don't think so. I just think that's too much because, well, I live in California.

So I've got to pay another 6% to 12% state income tax plus FICA tax. And then if you look at the tax rates for married couples, it's pretty similar except the income levels are double. So in other words, the marriage penalty tax has basically been abolished. So that threshold for the optimal adjusted gross income for married couples is probably around $326,600 because after $326,600, you're paying a 32% marginal federal income tax rate, which, I don't know, it just doesn't feel right to me.

So it's up to you to figure it out. And these tax rates are also a good indicator for when you should contribute to a Roth IRA. So if your tax rate is 24% or below, it's probably OK to contribute to a Roth IRA. If your tax rate is 32% or above, I would definitely not contribute to a Roth IRA because chances are greater that when you're retired, you're going to be making less money than while you're working.

And if you're at the 32% or higher marginal income tax rate, you're already making a really healthy income. So it just makes no sense to pay that higher tax rate when most likely you're going to pay a lower tax rate in retirement. So that's about it, folks. You've got to know your tax rules.

Supposedly, the tax code is tens of thousands of pages long. And frankly, we all make mistakes. I've done my taxes for over 10 years. And I'm sure I've made at least one error every single year. And the IRS knows that the tax code is complicated and knows that we all make mistakes.

So they're not like the movies where they're waiting outside your door to audit the crap out of you. You just got to know the tax rules, follow the tax rules, do your best. And if you make a mistake, well, they're going to ask for you to pony up. Or maybe they might give you a refund.

So this year, I actually received, I think, around a $2,500 refund from the state of California because I amended my 2017 tax return. But at the same time, I had to pay like $2,000 more to the federal government. Whatever the case may be, the IRS figures it out for you.

You just have to do your best to do your taxes properly. If you haven't done your own taxes, I highly recommend trying. You're going to learn so, so much about how the system works. And you're probably going to take steps to optimize the way you earn and also optimize your expenses to reduce your taxable income as well.

Thanks, everyone, for listening. I want to remind everyone that I am not a tax professional. I've just been doing my own taxes for decades now. And I'm always learning something new. And I think it's incumbent on all of us to know the tax code. If you want professional tax advice, talk to a professional.

Double check with someone who does this for a living all day long. I just look at this for hours every single year when I do my own taxes. Talk to you guys later.