There are many things in life that you do not have to pay for. From unnecessary insurance policies, like mortgage life insurance, to a variety of taxes, there are quite a few things that you might be paying for that you don’t need to be. One of the big ones is taxes. From hidden taxes we don’t know we are paying, to taxes that we know we are paying, but we don’t have to, there are some taxes that you should consider avoiding. Some taxes are avoidable, and placed on “vices.” The cigarette tax is a good example of this. In some states, alcohol is taxed rather high. Practices considered very unhealthy, or that could result in danger to others, are taxed at a higher rate. And, don’t forget that the vice of gambling comes with “phantom winnings.” These are winnings you are taxed on, even if you experience a net lossIf you participate in these activities, you will find yourself taxed. The only way to avoid these types of hidden taxes is to avoid participating in the activities.
Another avoidable tax is something that you may know about, and that you are paying right now. The self-employment tax for sole propieterships can be quite hefty. However, you can cut that down dramatically by becoming an L.L.C. There are certain accounting practices you will have to go by, but it’s worth it once you pay the smallish (usually $150 to $300) fee to get set up. The Alternative Minimum Tax may also fall into this category. It is worth a trip to a tax accountant to discover what sorts of taxes you are paying to the IRS that can be diminished.
If you are interested in learning more about hidden taxes and what you can do about them, Forbes offers this great photo post about them.