FFN #34: Could You Have Paid Less on Your Taxes?

👇🏽 Free Workshop to Maximise Your Earnings

We are pretty good at a few things at FF (if we don’t say so ourselves), but tax and accounting are not one of them so we’re asking our friends at Lettuce (the automated tax and accounting experts) to help our community save on their next tax bill. On May 15th at 4 pm ET, we are excited to be offering a workshop with Lettuce, where you’ll be hearing from Gabrielle, their Head of Marketing (and an S-Corp owner) who overpaid her taxes by almost $100K (welp!) during the consulting chapters of her career. In helping build Lettuce, she knew that there were others in the same boat, unknowingly giving away their hard-earned money. Today her mission is to ensure freelancers like you don’t make the same mistakes she did. 

In this workshop, you’ll get to learn how to take the work off your shoulders when it comes to tax time and minimise mistakes, how to hack the system so you can get more out of what you earn and automate your systems so you have more time to do what you love. #sponsored

⛑ Open a Health Savings Account

We aren’t tax experts like we said before, but this is a tax hack we recently read to implement. Establishing a health savings account (HSA) is like setting up a medical IRA to cover medical expenses and offer tax benefits, even if you rarely get sick.  

How does an HSA benefit you at tax time?

• You can subtract your yearly HSA contributions from your taxable income, within the set annual limits.

• Earnings on your HSA funds are tax-exempt.

• Withdrawals for medical costs are tax-free, but nonmedical withdrawals incur taxes and penalties.

• After turning 65 or in case of disability, you can withdraw from your HSA penalty-free; nonmedical withdrawals are subject to regular income tax.

👵🏽 Build Wealth for the Future

This can feel like a bit of delayed gratification but contributing to retirement and investment accounts can lower your taxable income as a freelancer through various mechanisms:

• Pre-Tax Contributions: Traditional retirement accounts like a SEP-IRA, Solo 401(k), or Traditional IRA allow you to contribute pre-tax dollars. This means the money you contribute is deducted from your taxable income for the year, reducing your overall tax liability.

• Tax-deferred Growth: Investment accounts such as a Traditional IRA or 401(k) offer tax-deferred growth. What does that mean? Well, you won't pay taxes on the gains until you withdraw the money in retirement. This can help your investments grow faster since you're not losing a portion of your gains to taxes each year.

• Tax Credits and Deductions: Some retirement contributions may qualify for tax credits or deductions. For example, the Retirement Savings Contributions Credit (Saver's Credit) allows eligible individuals to claim a tax credit for contributions to retirement accounts, further reducing your tax bill.

• Reducing Adjusted Gross Income (AGI): Contributions to retirement and investment accounts lower your Adjusted Gross Income (AGI). A lower AGI can make you eligible for other tax benefits, such as deductions, credits, or lower tax rates that are based on income thresholds. 

Swoon

Spring has sprung so I’m loving all my cold drinks while I work. I love lemonade but I don’t love the ingredients or the huge amount of sugar that’s in traditional brands. Recently, a friend put me onto Swoon, which has been the perfect switch! They are naturally zero sugar and have no artificial ingredients. My go-to’s are their lemonade and pink lemonade flavours.