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Message
re: Reading material request - stuck in the W2 trap
Posted on 1/2/26 at 12:30 pm to PerplenGold
Posted on 1/2/26 at 12:30 pm to PerplenGold
quote:
Find one that specializes in tax strategies. CPAs are not created equally. Some just want to make sure you pay what you're 'supposed' to. The good ones will offer alternatives and know people who are very familiar with legal loopholes that our beloved congressional representatives codify so they can avoid taxes. These can be quite complex but available to everyone if you have the right advisors.
Gotcha. Know any good ones in the Baton Rouge area?
0
Posted on 1/2/26 at 12:30 pm to lynxcat
Also, there’s not much to tax strategy at this point other than building multiple different buckets of funds that will allow flexibility as you reach financial independence.
401K max
HSA max
Traditional IRA contributions (non deductible) and then back door.
Plow money into taxable brokerage account.
If kids in picture, 529s can be applicable as well but don’t help the federal tax in the short term.
That’s the plan. Each of these give flexibility for the future. Just do these things for the next decade and you will be in a great position (and will have flexible tax strategy to deploy).
401K max
HSA max
Traditional IRA contributions (non deductible) and then back door.
Plow money into taxable brokerage account.
If kids in picture, 529s can be applicable as well but don’t help the federal tax in the short term.
That’s the plan. Each of these give flexibility for the future. Just do these things for the next decade and you will be in a great position (and will have flexible tax strategy to deploy).
Posted on 1/2/26 at 1:01 pm to lynxcat
quote:
W2 high income earners just have to accept that you will play a high marginal rate and there is very little that can be done about it.
This. No CPA is going to have any legal suggestions for you that will save you any significant amounts tax wise. You're W2. Just the way it is.
Posted on 1/2/26 at 3:32 pm to lynxcat
quote:
401K max HSA max Traditional IRA contributions (non deductible) and then back door. Plow money into taxable brokerage account. If kids in picture, 529s can be applicable as well but don’t help the federal tax in the short term.
Yeah we are doing all of these. Both of us are maxing our 401k (technically she has a 403b). I’m considering slowing down my contributions to redirect a little more towards a taxable account just in case I can retire earlier.
We are maxing the HSA now, but we only just qualified for this last year so we are putting the max we can in there. Everything over 1,000 gets invested in a target retirement fund for now (Vanguard 2050). But I can make some adjustments if needed. I think our max is $8600 this year but I need to check.
I’m a big fan of the 529 plan especially now that some of it could potentially roll into a Roth for the kids one day. We set aside about $400/month for both kids (5 and 1 years old) after making one initial $4,000 investment the month they were born. I have no idea what college will cost for them - but I’m hoping to have about $170k or so in each account by then. If they don’t use it - it’s the start of a retirement account for them or the beneficiary could hopefully be changed to their children one day.
We use Vanguard and I do the back door Roth for both of us out of a Traditional IRA. But that’s really the only thing I use the traditional IRA for - an intermediary to back door into a Roth once a year. Very easy on Vanguard’s website.
Now that we are done with the big house expenses, we are trying to dump cash into a standard, taxable brokerage account too. This has been a major focus for me after buying a rental house in 2024.
We are able to set aside about $40k/year in that brokerage account. Among that I set aside about $5k/year for the most risky investments. But most of it is in Money Market and the Vanguard Index fund. Really wish we could set aside more but it’s surprisingly difficult for us to go beyond that. So we are going to try to crank up our defense game a little and try to cut expenses a little more soon. But things like insurance, property taxes, and utilities seemed to eat up whatever additional savings we find. I automatically pull cash from our checking account on the first and 15th of every month to go into this brokerage account. I find that this strategy helps me feel like there is artificial scarcity in our checking account and forces me and my wife to budget more carefully for our day to day expenses.
We unfortunately had to get a bigger car for the kids in 2023 and I feel like we overspent considering the timing of the purchase and the lack of incentives at the time. It should last but I just couldn’t talk the wife into getting a more practical, more affordable minivan. That SUV was a bit failure in our effort to minimize spending. It’s been a great car but it annoys me just to look at it even 3 years later.
Posted on 1/2/26 at 3:35 pm to TheOcean
quote:
This. No CPA is going to have any legal suggestions for you that will save you any significant amounts tax wise. You're W2. Just the way it is.
More worried about after we retire to be honest. Not much more I can do now. Maybe pick up another rental and deduct some depreciation? Really not ready for that until I can pay cash for the next one.
Don’t they have this minimum distribution rule for 401k’s that I’ll have to deal with after retirement? Seems like I’m going to take it on the chin for income taxes there too. That’s what I’m trying to reduce if I can.
This post was edited on 1/2/26 at 3:51 pm
Posted on 1/2/26 at 4:28 pm to horsesandbulls
quote:
At 500k in w2 wages the rental losses will likely be limited
he won't get jack shite. they start being phased out at 100k. at 150k you lose them all for that year. he can carry suspended passive losses forward tho for future tax years depending on his MAGI or when he sells property.
quote:
and stacked for the future when they move back to lower tax brackets.
this is what i had to do. I sold 4 properties last year so it blew up my MAGI.
i have carried deductions forward in the past as well.
This post was edited on 1/2/26 at 4:31 pm
Posted on 1/2/26 at 4:29 pm to dewster
quote:
Maybe pick up another rental and deduct some depreciation?
nope. see above post
if your MAGI is not over 150k u can get some deductions.
interest
insurance
taxes
depreciation
maintenance
property management fees
This post was edited on 1/2/26 at 4:34 pm
Posted on 1/2/26 at 4:32 pm to dewster
Thanks for starting this thread. In a similar boat. Currently a bit older by a few years than you are. Congrats on the efforts you have made to set yourself up for success.
Posted on 1/2/26 at 4:43 pm to dewster
quote:
Good catch, starting in 2025 catch up contributions are post tax. Is that for earners over $150k or all? Not finding a good IRS source.
Those dont kick in until 73. You have plenty of years before that to convert them to Roth while in lower income retirement years. As a high earner in high bracket why lass on traditional 401k to contribute to brokerage with post tax dollars? You can tap 401k and Roth early without penalty (look into rule of 55, 72(t), etc) You make enough to max 401k and fund brokerage with remainder. HSA is triple tax advantaged so keep maxing it but pay for medical out of pocket and let the HSA continue tax free growth. Keep reciepts and use them for tax free withdrwals later (another option for tax free retirement income)
Posted on 1/2/26 at 5:59 pm to dewster
I’m curious how you guys are making 500k for a few years and 250k before that with a rental property and your net worth isn’t 1 million plus now? Do you own a house? How much left on the mortgage? Car payments?
Posted on 1/2/26 at 10:46 pm to tigerbacon
a W2 working for someone else is not bad especially making what he does. However the catch is it gives you no tax benefits other than the basic things(401k, etc) discussed that can lower taxable income for fed and state taxes. of course there are limits to that.
i am a W2. the key here is I work for my corporation and write my own W2. I get massive tax deductions on my K1 income. No way could i ever go back to seeing all my income taxed as a W2 working for someone else.
i am a W2. the key here is I work for my corporation and write my own W2. I get massive tax deductions on my K1 income. No way could i ever go back to seeing all my income taxed as a W2 working for someone else.
This post was edited on 1/2/26 at 10:50 pm
Posted on 1/2/26 at 10:56 pm to Fat Bastard
quote:
a W2 working for someone else is not bad especially making what he does. However the catch is it gives you no tax benefits other than the basic things(401k, etc) discussed that can lower taxable income for fed and state taxes. of course there are limits to that.
i am a W2. the key here is I work for my corporation and write my own W2. I get massive tax deductions on my K1 income. No way could i ever go back to seeing all my income taxed as a W2 working for someone else.
What a useless and long winded way of saying you have an S Corp.
Congrats I guess
Posted on 1/2/26 at 11:53 pm to Mingo Was His NameO
quote:
quote:
a W2 working for someone else is not bad especially making what he does. However the catch is it gives you no tax benefits other than the basic things(401k, etc) discussed that can lower taxable income for fed and state taxes. of course there are limits to that.
i am a W2. the key here is I work for my corporation and write my own W2. I get massive tax deductions on my K1 income. No way could i ever go back to seeing all my income taxed as a W2 working for someone else.
What a useless and long winded way of saying you have an S Corp.
Congrats I guess
Congrats on being a dick. I guess.....
Posted on 1/3/26 at 12:04 am to Mingo Was His NameO
quote:
What a useless and long winded way of saying you have an S Corp.
run back to the cesspool aka OT where you belong kid.
Posted on 1/3/26 at 7:47 pm to Fat Bastard
quote:
run back to the cesspool aka OT where you belong kid.
Nobody wants his little munchkin hobbit self over there.
Posted on 1/4/26 at 9:16 am to Fat Bastard
quote:
a W2 working for someone else is not bad especially making what he does. However the catch is it gives you no tax benefits other than the basic things(401k, etc) discussed that can lower taxable income for fed and state taxes. of course there are limits to that. i am a W2. the key here is I work for my corporation and write my own W2. I get massive tax deductions on my K1 income. No way could i ever go back to seeing all my income taxed as a W2 working for someone else.
Wife and I get a K1 but we still don’t get to write anything off. Am I missing something?
Posted on 1/4/26 at 10:08 am to Fat Bastard
quote:
run back to the cesspool aka OT where you belong kid.
You provided absolutely nothing with your post except a subtle brag about how you’re self employed
You aren’t a w-2 worker and you know that, but you had to let all your e friends know you aren’t
Posted on 1/4/26 at 2:13 pm to Rize
quote:
Am I missing something?
Definitely tax avoidance. Possible tax fraud.
Posted on 1/6/26 at 11:56 am to tigerbacon
quote:
I’m curious how you guys are making 500k for a few years and 250k before that with a rental property and your net worth isn’t 1 million plus now?
If you include real estate equity (RE valuation is very dynamic and not super reliable).....we are crossing that mark.
If not for medical student loans and insane federal income tax rates....we might have gotten here years ago.
quote:
Car payments?
We have one for my wife's car and I wish we didn't. It's a very low rate, but the transaction price was higher than it should have been because we needed a bigger car at the worst possible time to buy a car.
I have a taxable brokerage account that I could use to pay cash for the next one, but I simply won't do that until it's absolutely necessary. And I play to go cheaper next time.
This post was edited on 1/6/26 at 12:11 pm
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