How to Save on Taxes By Reducing Your Income Without A Pay Cut

Scripted’s talented community of freelance writers have a variety of expertise and specialties. While many of our customers hire writers to execute their content marketing strategy, our writers deliver high-quality content in many formats. You can find content writers, blog writers, ghostwriters, and SEO writers all with experience in your niche.

The following is a an example of a Personal Finance blog post:

How to Save on Taxes By Reducing Your Income Without A Pay Cut

Did you know that you can cut your tax bill by reporting a lower income without actually lowering your income or committing tax evasion? The trick is reducing your Adjusted Gross Income (AGI).

What is AGI?

Your Adjusted Gross Income is your income minus certain special deductions that directly reduce your income rather than reducing your taxes owed. These are commonly referred to as "above-the-line deductions" and include the following.

  • Health savings account contributions
  • Moving expenses
  • Contributions to Traditional IRAs, 401(k)s, and other qualified retirement plans
  • Student loan interest
  • Alimony paid
  • Other items listed in the Adjusted Gross Income section of Form 1040

Why is AGI Important?

AGI is the starting point for calculating taxes and provides three key benefits.

  • Reduces your income tax owed by reducing your taxable income.
  • Qualifies you for certain tax benefits based on AGI (see below).
  • Entitles you to larger deductions or credits that are calculated based on a percentage of your income. For example, the Obamacare subsidy keeps you from paying no more than about ten percent of your AGI for health insurance. The lower your AGI, the higher your credit or deduction.

What Tax Benefits Are Based on AGI?

These are some of the common credits and deductions with AGI cutoffs.

  • The traditional IRA deduction has several cutoff points depending on if you're married and if you have a retirement plan at work. The lowest cutoff is $61,000 for single filers with a work retirement plan.
  • The student loan interest deduction is lowered if your AGI exceeds $65,000 and is eliminated if your AGI exceeds $80,000 (both numbers double if you're married filing jointly).
  • The Affordable Care Act's subsidies are available to those whose AGI is less than 400 percent of the federal poverty level based on their family size ($80,640 for a family of three).

How Can You Lower Your AGI?

You can lower your AGI by using above-the-line deductions. For example, if your income for the year was $50,000 and you contribute the $5,500 maximum to a Traditional IRA, your AGI is $44,500.

One thing to note is the concept of Modified Adjusted Gross Income. MAGI essentially prevents double dipping. For example, you can't use your IRA contributions to reduce your AGI for the IRA deduction. Continuing the above example, you would take your $44,500 AGI and add back in your $5,500 IRA contributions for a $50,000 MAGI when you calculate your IRA deduction. However, your AGI for calculating your income taxes and other credits or deductions would still be $44,500.

To find out which above-the-line deductions you qualify for and if you've been paying the IRS too much, call a local tax professional today.

Erin F.

Erin F.

Tampa, Florida, United States

I specialize in the business side of small business — accounting, finance, and law — along with personal finance issues that impact small business owners such as credit cards and insurance. My clients include accounting firms, law firms, banks, tech companies, and marketing ag...

Jobs Completed 332 Customer Ratings 151 Job Success 331/332 (99%)

Other content marketing examples from Erin F.

How to Understand Your IRS Notice

You received an official looking letter in the mail that says it's from the IRS. How do you know ... Read More

Linking Best Practices for Lawyers

Outbound links are an important part of SEO. When Google is determining how useful your law firm ... Read More

What to Do If Your Tenant Isn’t Paying Rent

As a landlord, having a tenant that isn’t paying rent is never a good thing. If you’re a small la... Read More

5 Reasons QuickBooks Sucks and 3 Reasons Why Everyone Still Uses It

5 Reasons QuickBooks Sucks and 3 Reasons Why Everyone Still Uses ItIf you've ever screamed, "Quic... Read More

Black Boxes in Truck Accident Cases

Semi trucks have black boxes, or event data recorders, that are in many ways similar to the fligh... Read More

WordPress Websites: Overview and How to Get Started

WordPress Websites: Overview and How to Get StartedThousands of law firms, accounting firms, and ... Read More

Similar content marketing examples from other writers

How to Get That Well-Deserved Raise

How to Get That Well-Deserved RaiseWhen you find yourself in a position where you feel you deserv... Read More

What happens if interest rates increase too quickly?

When interest rates increase too quickly, it can cause a chain reaction that affects the domestic... Read More

How to Become a Self-Employed Tax Preparer

Tax time creates a flurry of activities for many tax preparers and accountants. Some tax firms lo... Read More

Finding Your Way to Freedom from Credit Card Debt

Finding Your Way to Freedom from Credit Card DebtWhen considering your financial situation, it’s ... Read More

Why Freelancers Should Be Thinking About Tax Season All Year Long

Ah, tax season. Whether you’re a business owner, independent professional, or a freelancer, tax s... Read More