Will Taxes Be Higher or Lower in the Future – Tax Deduction Myth
Hello this is Kraig Strom, with wealthycastle.com, and another financial discussion from the road. Maybe appropriate as you think about your financial journey, a journey towards your retirement. Here’s a question for you, a question that comes up several times each week. Do you believe that taxes will be higher or lower in the future?
If you are like most people, your immediate reaction is that taxes will be higher in the future. Stop and really hang on to that. What does that mean if you’re putting money away? Doesn’t that mean that you’re most likely putting money away today, postponing your tax from today which is possibly lower than the tax rate we’ll see in the future?
Remember, there’s no such thing as a tax deduction. We got a tax postponement, which is simply postponing the tax into a future point in time. You have to ask yourself if you believe that taxes will be higher in the future, why would we want to postpone our tax to a point in the future when the tax rate is most likely going to be higher than today?
Think about this, do you think you’ll have mortgage interest deduction when you retire if everything works out? Will you have a mortgage interest rate deduction? Probably not. Will you have children and dependents at home as a tax deduction? Probably not. Will you have business expenses and deductions, probably not. Most likely, if all goes well in retirement, you will not have any of the tax-friendly benefits you have today that could offset your taxes in the future, and yet you could very likely be in a higher tax bracket. That is something that you should consider.
Think about that, remember the question, “Do you believe that taxes will be higher or lower in the future?”
Kraig Strom, CFP®, ChFC® is a Certified Financial Planner® and owner of WealthyCastle.com. He can be reached at 877-297-5851 or www.WealthyCastle.com.