Ever wonder whether it’s possible to (legitimately) not pay taxes? Tax time is coming up and that means we get to discuss my favorite topic: taxes.
Paying taxes can be an exhausting obligation. It’s really sad sometimes to see such a large portion of your income go toward something that you can’t see. Then, you pay somebody to do your taxes, taking up to 10% of your refund (if you have one) which just makes it hurt even more.
image via https://www.flickr.com/photos/59937401@N07/
As a side note, you should be doing your own taxes. Many people think that taxes are too complicated to do themselves, but this isn’t true. Use a program that will walk you through it. I use Turbotax, which is much cheaper then an accountant and will allow you to do your entire family’s refunds. Plus, you can get the software on sale – I use Turbotax Standard 
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I’m not surprised, then, that I have been asked by some readers for tips on how to not pay taxes.
While I do think all citizens paying taxes (when they are able – meaning within the parameters of the government’s taxation rules) is beneficial for the greater good of the economy, as well as the infrastructure of the cities and towns that we live in, I definitely understand the desire to keep your money.
So here we go – a few tips on how to reduce or, even not pay taxes.
Make a Low Income – You Won’t be Taxed
Don’t want to pay taxes? I met a guy one time who was serious when he told me that he worked in a low paying job because he didn’t want to pay taxes.
Depending on where you live, there is typically an amount of money that, if you make under that amount, you will not be taxed on.
Now, this completely defeats the purpose to me; even when you are taxed, if you make more money you keep more money. But it is a strategy to not pay taxes.
Use Tax Deductions and Tax Credits to Lower Your Taxes
Have dependents, going through college, or contributing to your retirement account? All of these things, plus a whole wack of other things, can reduce the amount of tax that you pay. Doing these things doesn’t mean you won’t pay taxes, but in combination with a few options you may reduce them drastically.
If you donate to a cause, you can use the amount that you donate (over a minimum amount, which will depend on your area) as a tax credit.
When I was a student, because I was full-time, I didn’t pay taxes because, despite my income being fairly high for a student, I could claim my tuition, textbooks, and education amount. Then, I’d claim my eligible donations, and then I would reduce my taxes even further by claiming my RRSP contributions.
If you Google a list of tax deductions and credits, you will likely be able to find one for taxes in your area. The Canadian Revenue Agency provides this tool to find deductions if you are Canadian.
Many people forget or don’t know that they can deduct so many of these things, including union dues, carrying charges/income expenses, moving expenses, etc.
Work For Yourself and Track Your Expenses to Claim Them at Tax Time
Because I work online so much, I am partially self employed. I can claim any expense related to my self employment. For instance, part of my home being my home office, the conference I went to in July about blogging, my internet bill because I use my internet almost solely for blogging and work purposes, my Adobe Illustrator purchase because I use it for my online business.
Be sure to track every single expense, including the gas it takes to drive to a business meeting, if you take a client out for lunch, if you outsource anything.
If you do end up spending more than you make for your business, there is something seriously wrong, but you can reduce taxes quite a bit by ensuring you are tracking all of your expenses.
Illegal: Work Under the Table
Of course this is an illegal option that I am most certainly not condoning (if you do this, you are leaching off of your country without contributing), you can work “under the table” to avoid paying taxes.
I was surprised to hear from my friend’s husband that apparently there are a lot of companies looking to hire people under the table so they can save money, too.
Be aware, however, that this is shady – you won’t be getting any health benefits. If you get hurt at work, you won’t be able to claim it. If somebody reports you, you can be on the hook to pay fines and penalties.
This is one of the only ways to pay no taxes whatsoever, while still making a normal salary.
How to you lower or eliminate the amount of tax you have to pay?
I think the one about tracking business expenses is a biggie for a lot of people- at least I know that I routinely forget this one! I’ll have to get better at this as time goes on and hopefully my blog grows 🙂 Thanks for the tips!
Haha that’s one of the most important ones!
Along these same lines…..a very important thing for people to do is know how much taxes they will likely owe at the end of the year and have their withholdings set properly. There’s nothing worse than getting to the end of the year and finding out you owe a ton to the government.
I know – especially owing to the government. I would rather owe to anyone else!
Owning your own business really does help you cut down on your taxes if you do it right. Don’t go overboard and itemize things that can’t count but there are so many ways to get those taxes reduced.
Haha there are a lot of people that will try to deduct anything and everything.
I have definitely been tracking business expenses this year since I started freelancing. I’m hoping that will help us save a bit on taxes. I also plan on trying to do our taxes ourselves (with the help of Turbo Tax, of course), which will save us money over having someone else prepare them.
It should help you save quite a bit on taxes. We always do taxes ourselves. It’s not that hard!
This post is timely. I have to get all my papers ready. The good thing is we have a friend that is a CPA that ca help us with this.
It’s always handy to know people 😉
Tax deductions and self-employment allow us to reduce our over all tax amount. We don’t get to live tax-free, but we’re able to cut down our tax bill.
Cutting down the tax bill is still good – I haven’t been able to be tax free in quite some time.
In the US, eligible charitable donations are tax-deductible… yet another way to avoid paying the taxman!
Yup, lots of countries do this. We take advantage of that but we don’t donate just for the tax deduction.
I always look at taxes as a double edged sword. On one hand, it sucks to pay taxes, but on the other hand, if you’re paying more in taxes it generally means that you’re earning more, which is a good thing.
I’m a big fan of earning more 🙂
Taking actions to reduce your tax liability is called tax planning – and there’s nothing wrong with it. It’s taking legal measures and it not the same as tax fraud or tax evasion, which are illegal. Oh, and I’m surprised to hear that any legitimate company would hire anyone “under the table.” They can just as easily avoid paying payroll/employment taxes by hiring as a contractor instead of an employee.
LOL – I didn’t say legitimate, reputable companies. It’s also not that easy to avoid paying extra by hiring a contractor. You can’t hire a contractor and treat them as an employee, and the quality of people you can get by hiring a contractor suffers (because you aren’t paying them benefits or giving them the benefit of regular employment). Further, you still have to pay taxes on the amount you pay your contractor, AND you usually have to pay things like worker’s compensation insurance, etc.
Timely post! Hopefully this will help people find some strictly legal ways to save a bit on taxes this year – the IRS is not someone I want on my case!
Oh gosh, no. People will go to great lengths to avoid paying taxes, something that I would never do. I wouldn’t even want to – I would feel guilty for not paying into the services I use.
I have quite a few tax deductions I will take advantage of this year, but I will still definitely owe plenty!
Yeah, I think I will too. I’ve made too much online to not owe quite a bit.
When I was a landlord, I managed to pay little or no taxes for nearly 20 years. Between expenses and depreciation, I was able to shelter a great deal of income. Now my goals have changed! I focus was building up assets and now I want to build up income.
That’s funny – here in Canada, we have to pay more taxes as a landlord. We can’t write off mortgage interest like you guys can in the states.
My wife is a CPA and is going through tax planning with her clients right now. Avoiding taxes is great, evading taxes (your last option) is illegal, as you mentioned.
She says that many people pay more than they need to in taxes because they don’t track their legitimate deductions, and therefore don’t claim them.
Also, she says that having more expenses than income for your business over the course of a few years is a red flag to the IRS that what you are engaged in is actually what they call a “hobby” and not a true business. If that’s the case, then you can’t deduct more expenses than income.
Not just illegal – morally wrong, in my opinion. Other people are paying for your existence. It’s normal to have business expenses that are > income for the first couple of years of a business, but if it’s longer than that, you probably need to re-consider working for yourself, haha.
I keep receipts for everything that I think might be remotely tax deductible. Then I check with my dad, the tax attorney, at the end of the year to see what gets deducted and what doesn’t.
You’re lucky that your dad is a tax attorney! That must be helpful!
I’m gearing up to volunteer for tax prep this year! Better finish my tests. Thanks for the reminder.
Good luck!
I am lucky because I’m living in my host country without paying income tax. Most of the products or goods in the markets are affordable because of tax-free policy.
Wow, awesome. You are lucky!
I’m trying to pay as little taxes as possible by contributing more to my 401k plan, getting deductions for mortgage interest, and I signed up for flex spending which can be used for health care and dependent care. I also can pay for commuter/subways with before tax money.
All great moves. I think the best one is contributing to your 401k – your saving on taxes AND saving for the future.
I have been trying to max out my 401k and that has keep my taxable income down. Of course I don’t really make enough to make it a challenge to fall below the taxable income limit.
I’ve never maxed out my retirement savings (RRSP in Canada). Good job!
A few other ones besides the ones already mentioned in the post:
1) Take full advantage of tax-deferred/tax-free accounts. RRSP and TFSA are the common ones, but if those are maxed out you can look into permanent insurance with an investment component.
2) Leverage to deduct interest (beware: leveraging magnifies your losses as well as gains)
3) Income splitting with your spouse via spousal RRSP, pension income tax credit, and CPP credit splitting.
There are more but those are the ones I can think of off the top of my head.
There are definitely great ways to reduce the amount of taxes you pay!