Do you want to pay taxes now or later?

One key to success in our business is helping our prospects and clients “find” the money to save and invest in products that will benefit them and their families.

Last month I shared an idea about how to inspire prospects and clients by explaining the value of paying taxes now, instead of later in a higher tax environment. I would like to expand on that idea this month.

This example assumes that the clients are a couple over the age of 65, filing a joint income tax return, and taking the standard deduction. There are obviously many other permutations; however, the “idea” remains the same regardless of the various filing statuses.

Here we go: 

• The standard deduction for this couple for 2013 is $14,600. They each receive a personal exemption of $3,900. So, $14,600 plus $7,800 is $22,400. Our couple can make $22,400 of taxable income and pay no federal income taxes.
• The next $17,850 is taxed at 10 percent, or $1,785. If we add $22,400 and $17,850, the total is $40,250. So if our couple has $40,250 of taxable income, they pay $1,785 of federal income tax. That is 4.5 percent.
• The next $54,650 is taxed at 15 percent, or $8,198. If we add $22,400 and $17,850 and $54,650, the total is $94,900. So if our couple has $94,900 of taxable income, they pay $9,983 of federal income tax. That is 10.5 percent.

Now it is time to get excited! I ask, “Do you think taxes are going to be higher in the future? Do you think it would be a good strategy if you could eliminate the taxes on $94,900 of taxable income for your family by paying only 10.5 percent in tax? Do you want to control your taxes or do you want to be controlled by your taxes?” 

Progressive nature of income tax