In my last posting entitled Tax Planning is an Investment Like No Other, we discussed how proactive planning to reduce, defer and sometimes even eliminate taxes offers stunning returns on investment. As a reminder, the investment is the fee you pay to implement a tax plan and your Return on Investment (ROI) is the tax savings you enjoy by taking advantage of tax law. The real ROI, though, comes in the freedom you have to spend those tax savings any way you wish!
Think out of the box and allow your imagination to soar. Do you have a daughter getting married? Why not let Uncle Sam pay for it through tax savings? Have you always wanted to sink your toes deep into the white sands of Oahu’s Hanauma Bay and snorkel in its clear blue waters? Let those tax savings pay for your dream trip. Or, perhaps, have you always wanted to buy investment real estate but didn’t have the funds for a down payment on a starter rental? You do now. Let the tax savings be your down payment.
Here is another choice: Use the tax savings to pay off debt. Doing so can also bring to you a stunning Return on Investment: Every dollar of debt that you decrease equals a dollar more in your pocket to save or spend elsewhere. That also is a 100% guaranteed no-risk return on investment!
Per a recent article published in the Huffington Post, the average U.S. household owes debt of $130,000. As of the fourth quarter of 2015, these debts include:
- Mortgage debt, with each household having an average mortgage of $168,614.
- Credit cards, which average out to $15,762 per household.
- Auto loans, which average out to $27,141.
- Student loans, which average out to $48,172.
Can you think of a better way to retire debt than by letting Uncle Sam pay for it? The client I mentioned in my last posting saved more than $70,000 in taxes simply by appropriately applying existing tax law to her situation. That would definitely pay for a wedding, a dream trip or the down payment for a starter rental.
Or perhaps you are facing something financially that is a burden and causing you great distress. Proactive tax planning just might be your cure.