8 Ways Married Couples Can Use Tax Breaks to Build Wealth

[Yusra3]

As April nears, married couples should explore strategic ways to maximize tax benefits and drive long-term wealth growth. Here are 8 impactful tactics to consider:

Open Spousal IRAs

While income limits restrict some IRA contributions, couples can each fund IRAs in the other's name regardless of who earns the income. This effectively doubles tax-advantaged retirement savings annually.

Maximize 401(k) Matching

Many employers match a percentage of 401(k) contributions. Couples should ensure they fully earn all available matching funds, essentially gaining free money.

Mega Backdoor Roth IRA

For couples with ample income, mega backdoor Roth IRAs allow after-tax 401(k) contributions to be converted to Roth IRAs for exponential tax-free growth potential.

Claim Earned Income Tax Credit

Lower earning spouses can help couples qualify for EITC, a credit worth up to $6,728 for families with children. This provides an extra tax refund boost.

Income Shifting

Shifting the ownership of assets, deductions and income between spouses to maximize brackets can yield more favorable rates and deductions. Consult a tax pro on legal shifting strategies.

Split Gift Tax Exclusions

By gifting assets separately, spouses can use two annual $16,000 gift tax exclusions for more tax-free gifting to heirs. This accelerates intergenerational wealth transfers.

Bunch Itemized Deductions

Strategically timing deductible expenses like charitable gifts and medical procedures around alternating high/low income years yields bigger deductions.

File Status Options

Depending on income breakdowns, alternate filing as joint, separate or head of household changes tax liabilities. Crunch numbers to determine optimal status.

Leveraging all available credits, deductions, exclusions and income-shifting tactics allows married couples to retain more wealth over a lifetime. Consult tax and financial advisors to craft a personalized optimization plan. Being proactive on taxes leads to long-term savings.

 

[Nite]

Maximising the use of tax-advantaged retirement accounts, taking advantage of employer matching, utilising a mega backdoor Roth IRA, claiming the Earned Income Tax Credit, shifting income between spouses, splitting gift tax exclusions, bunching itemized deductions, and leveraging all available resources can help couples retain more wealth over their lifetime and drive long-term growth. It is important to consult with tax and financial advisors to create a personalised plan and be proactive in managing taxes.

 

[Suba]

Each country will apply different tax rules, unfortunately the ways married couples can use Tax breaks cannot be applied in my country, the tax calculation in my country is based on income from various sources such as salary, side business investments etc. and minus non-taxable income, good for bachelors, married couples and dependent children. Meanwhile, taxes will be deducted directly for prizes or lottery wins.