Taxes are often a hot topic for the Childfree community. Why is this? It’s common to hear about parents who seem to barely pay taxes at all, by virtue of having children and qualifying for child tax credits, while many Childfree people are already claiming zero on their W-4 form and still owing taxes every year. While it may sting to hear about $3,500 tax credits per child, remember that this doesn’t come close to covering all expenses of raising a child. In August 2022, the Wall Street Journal noted that it costs $300,000 to raise one to the age of 18. Even with $3,500 back per year, per child, Childfree people are coming out ahead financially of those who have children.
Taxes Are a Complicated Topic
Americans pay many different kinds of taxes. And for many Childfree people, taxes are pretty simple. If you work for an employer, as opposed to being self-employed, you’ll have income taxes taken out of your pay. If you’re self-employed or have a side gig, you’ll have to account for your own income taxes. If you have investments that you sell, you’ll owe capital gains taxes on the amount of appreciation on that asset during the time you held it. Some states charge income taxes, but if they don’t, they often charge higher sales taxes to make up for the lost income. And we also pay property taxes. If you do the math, you’ll see that you spend a lot of your money on taxes.
Planning for Taxes
Note that it’s important to pay your taxes, and you shouldn’t be trying to avoid it, because if you don’t pay your taxes, there are consequences (after all, it was tax evasion that took down Al Capone!). So the question isn’t “How do I avoid paying taxes,” it’s “how do I plan for taxes”? Here are some other questions to consider:
- When should you hire a tax professional?
- How do changes in the tax laws affect what you pay?
- What is the most efficient way to pay your taxes?
- How can you maximize the deductions that you qualify for?
Connect with a Childfree Wealth Specialist® for tax-planning services, and learn how to potentially save money on taxes in the future, using the above considerations.