Key tax considerations for attorneys
As an attorney, you work hard to earn a high level of income and provide top-notch legal services to your clients. However, with higher income comes the responsibility of paying higher taxes. If you want to maximize your tax savings and mitigate your tax liability, there are several tips that you should consider. As a wealth advisory firm that specializes in working with attorneys, we have some insights that we would like to share with you.
Take “full” advantage of retirement plans.
One of the easiest ways to reduce your tax bill is to make contributions to your firm’s retirement plans such as 401(k)s and/or individual retirement accounts (IRAs). Not only do these contributions reduce your taxable income for the year, but they also help you save for retirement. If you are a partner in a large firm, you may also have the opportunity to contribute to a cash balance defined benefit plan, allowing an additional $100,000 or more of your income to be tax deferred.
Deduct non-reimbursed business expenses.
As an attorney, you may have several expenses that are necessary to run your practice that you were not reimbursed for by your firm. These expenses can be deducted from your taxable income, reducing your overall tax bill. Examples of deductible expenses include travel, supplies, and professional development courses. Keep detailed records of all business-related expenses so that you can take advantage of these deductions at tax time.
Consider a home office deduction.
If you work from home, you may be able to deduct a portion of your home expenses as a home office deduction. This deduction can include a portion of your mortgage or rent, utilities, and home insurance. To qualify for the deduction, you must use the space exclusively for business purposes and it must be your primary place of business. Of course, keeping meticulous records of these expense are of utmost importance.
Maximize your deductions for charitable donations.
As an attorney, you may be passionate about supporting various charitable causes. If you make charitable donations, make sure to keep records of all donations and take advantage of the charitable deduction on your tax return. This deduction can help reduce your taxable income and support causes that you care about. Consider bunching expenses in a particular year to be able to itemize deductions on your tax return. And consider using a donor advised fund as a key part of your charitable donation strategy.
Hire a tax strategist.
Navigating the complex tax laws can be a daunting task, especially if you're trying to maximize your tax savings. Hiring a tax strategist who specializes in working with attorneys can help ensure that you're taking advantage of all the deductions and credits available to you. They can also help you plan for the future, so that you're maximizing your tax savings over the long term.
In conclusion, as an attorney, there are several tax-saving tips that you can use to keep more of your hard-earned money. By taking advantage of retirement plans, deducting business expenses, considering a home office deduction, maximizing your deductions for charitable donations, and hiring a tax strategist, you can reduce your tax bill and keep more of your income for yourself. As always, consult with a financial advisor or tax professional before making any tax-related decisions to ensure that they are appropriate for your individual situation.